
Qass. 
Book- 



Br r f SQ 



Tariff Revision 




PHILADELPHIA 
American Academy of Political and Social Science 
^^ 1908 



t^^ 



CONTENTS 



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PAGE 

TARIFF REYISIOX A PUBLIC NECESSITY 1 

D. M. Parry, President, Parry Manufacturing Company, Indian- 
apolis, Ind. ; Ex-President, National Association of Manufac- 
turers. 

WHAT PROVISIONS OF THE DINGLEY TARIFF REQUIRE RE- 
VISION? 7 

Albert Clarke, Secretary, Home Market Club, Boston, and 
former Chairman United States Industrial Commission. 

WHAT OUGHT THE TARIFF RATES TO BE ON IRON AND 

STEEL MANUFACTURES ? 20 

A. B. Farquhar, President, A. B. Farquhar Company, Ltd., 
York, Pa. 

TARIFF RATES ON HARDW\ARE 26 

Charles W. Asbury, President, American Hardware Manufac- 
turers' Association, Philadelphia. 

HIDES, LEATHER, BOOTS AND SHOES AND THE TARIFF 31 

A. Augustus Healy, Vice-President, United States Leather 
Company, New York. 

WHAT OUGHT THE TARIFF RATES TO BE ON PAPER AND 

PULP? 86 

Chester W. Lyman, M.A., Assistant to President, International 
Paper Company, New York. 

RECIPROCITY IN OUR FOREIGN TRADE RELATIONS 46 

William R. Corwine, Secretary, American Reciprocal Tariff 
League, New York. ; 

TARIFF REVISION AND PROTEOTION FOR AMERICAN LABOR. 51 
John R. Commons, A.M., Professor of Political Economy, Uni- 
versity of Wisconsin, Madison. 

TARIFF RELATIONS WITH CUBA— ACTUAL AND DESIRABLE.. 57 
Edwin F. Atkins, of E. Atkins & Co., Boston, Mass. 

COMMERCIAL RELATIONS OF THE UNITED STATES WITH 

CANADA 66 

Hon. John Ball Osborne, Chief, Bureau of Trade Relations, 
Department of State, Washington, D. C. 

/J z : 



/ 



Contents iii 

PAGE 

NOTES OX OUR TARIFF RELATIONS WITH MEXICO 79 

Hon. Francis B. Loomis, Formerly Assistant Secretary of State, 
Washington, D. C. 

WASTE IN EXTERNAL TRADE IN GENERAL AND WITH THE 

ORIENT IN PARTICULAR 84 

John P. Young, Editor, San Francisco "Chronicle;" anthor of 
"Production and Progress," etc. 

OUR TARIFF RELATIONS WITH THE PHILIPPINES— ACTUAL 

AND DESIRABLE 99 

General Clarence R. Edwards, U.S.A., Chief, Bureau of Insular 
Affairs, War Department, Washington, D. C. 

THE CONVENTIONAL TARIFF SYSTEM 103 

N. I. Stone, Tariff Expert, Department of Commerce and Labor, 
Washington, D. C. 

THE AMERICAN INTERPRETATION OF THE "MOST FAVORED 

NATION" CLAUSE 119 

Chester Lloyd Jones, Ph.D., Instructor in Political Science, 
University of Pennsylvania, Philadelphia. 

THE MAXIMUM AND MINIMUM TARIFF 130 

John Franklin Crowell, Ph.D., "The Wall Street Journal," New 
York City. 

TARIFF MAKING— FACT AND THEORY 135 

H. E. Miles, of the National Association of Manufacturers; 
Chairman, Central Committee on Expert Tariff Commission, 
Representing Fifteen National Organizations. 

A PERMANENT TARIFF COMMISSION 145 

Hon. Albert J. Beveridge, United States Senator from Indiana. 

IMPORT DUTIES: HOW THEY SHOULD BE LEVIED 165 

D. A. Tompkins, President, D. A. Tompkins Company, Char- 
lotte, N. C; Member of United States Industrial Commis- 
sion, 1899-1900. 

AN ARGUMENT FOR A PERMANENT EXPERT TARIFF COMMIS- 
SION 170 

H. E. Miles. 



TARIFF REVISION A PUBLIC NECESSITY 



By D. M. Parry, 

President Parry Manufacturing Company, Indianapolis, Ind. ; Ex-President 

National Association of Manufacturers. 



The tariff question is no longer one of protection or free trade, 
but rather one of correcting the abuses of the protective system 
and of furthering the general industrial good by taking account of 
industries which have a surplus production seeking a foreign outlet, 
as well ,as of giving consideration to industries which cannot, with- 
out assistance, sustain themselves against foreign competition in 
the home market. The demand for new legislation to accomplish 
the purposes just stated has become widespread in recent years, 
and both political parties, recognizing the strength of the demand, 
have committed themselves this year to legislation in the near 
future. Inasmuch as for the last decade and a half the money 
question has rendered political results without meaning as relating 
to the tariff, the practical unanimity of opinion to-day that the 
tariff law needs overhauling is to be regarded as a decided gain for 
righteousness by those who believe in '"'sweet reasonableness" in 
tariff matters. However the scope of the promised legislation 
remains yet to be determined. The expression of independent 
sentiment, regardless of political affiliation, is largely responsible 
for the present movement, and perhaps this independent sentiment 
will have a potent influence in shaping the new legislation. It is 
significant that nowhere is there a dissent to the opinion that the 
tariff is high enough, and it is generally taken for granted that 
the new law must be in the direction of lower duties, either by 
direct revision or by the adoption of the maximum and minimum 
arrangement, whereby the same end can be accomplished through 
reciprocity treaties which at the same time widen the foreign market. 
In addition the outlook for the creation of a permanent tariff commis- 
sion is destined, I believe, to receive increased attention as offering 
the most feasible solution of the problem of introducing business 
principles into our tariff system. 

(265) 



2 The Annals of the American Academy 

There need be no apprehension that the new legislation will 
be antagonistic to the protective principle. Nowhere is there any 
serious advocacy of free trade. That the protective tariff has 
been and is a vital factor in the diversifying and building up of 
our industries is a deeply-rooted faith among the people. Even in 
the central West where not to exceed 5 per cent of the population 
are engaged in tariff industries, there is a general willingness to 
continue taxation for industries that need it. But, though the 
protective principle is not being subjected to serious attack, yet 
it is well to emphasize, on occasion, that the tariff is a tax 
paid by the people, and that no industry can acquire a vested 
right in its permanent payment. Surely if there were a more 
general understanding that the tariff is a tax in which private 
interests share the proceeds with the government, there would be 
a more rigorous questioning of various duties imposed than has 
yet been manifested. Also it is important to emphasize that 
unless the tariff is wholly a protective tariff there is no good 
excuse for its existence. Its one valid object is to enable the 
home producer to collect a tax or subsidy from the public in selling 
his product, this being done in order to encourage the development 
of the industry and to place it on a competitive level with foreign 
producers. A tariff levied for the primary object of raising gov- 
ernment revenue is an abomination and a crime. With the single 
and somewhat inconsequential exception of a tariff on articles which 
cannot be produced in this country, no tariff can be devised which 
does not give private interests a share in the proceeds. In the case 
of every tariff the government collects the tax only on the foreign 
article imported, while the home producer collects it on the article 
made at home. In the case of a tariff mainly for government reve- 
nue it is presumed no valid reason exists for giving the home pro- 
ducer the benefit of the taxing power, and, therefore, such a tariff 
is justly to be stigmatized as an engine for the unjust diversion of 
wealth from the possession of the many to the pockets of the few. 
As our present tariff is presumably solely a protective tariff, the 
revenue the government receives from it must be regarded as 
merely an incidental result of the protective policy, and treasury 
deficits cannot have any proper influence whatever on new tariff 
legislation — if the government finds it needs more money there 
is only one honorable and sensible way of raising it, and that is by 

(266) 



Tariff Revision a Public Necessity 3 

levying a tax of such a nature that the entire proceeds from it will 
go into the public coffers without division with private interests. 

It is almost universally taken for granted that there is a large 
number of industries in need of tariff protection, but when we 
come to specify these industries and to ascertain just how much 
protection is really needed, it must be confessed that the average 
man finds himself confronted by a riddle of almost sphinx-like im- 
penetrability. The ignorance on tariff details is colossal. For the 
want of some public agency which can investigate the needs of the 
industries and supply impartial data as to the effects of tariff 
duties, the public is like a trusting lamb being led to the slaughter. 
It is given out that Congress is well informed on the tariff, but 
it is painfully noticeable that when Congress has a tariff law under 
consideration it falls rapidly away from a discussion of duties on 
their merits, and resorts to the famous log-rolling method, which is 
based on that high dictum of statesmanship, ''You tickle me and I'll 
tickle you." The present tariff is just such a hodge-podge as may 
reasonably be expected under the circumstances. 

The tariff* costs the people millions of dollars annually, and 
it ought to be regulated from the standpoint of obtaining the maxi- 
mum of industrial good at the least cost. To do this it should be 
regarded as a business undertaking by the nation — it should be 
divorced as far as possible from politics. The creation of a per- 
manent tariff commission would go far toward accomplishing this 
end. Such a commission, composed of experts, would have the 
time to investigate every phase of the subject thoroughly, and its 
recommendations, founded on exact and impartial data, would 
carry great force. The members of Congress appear to oppose the 
creation of such a commission because they seem to fear it will 
encroach on their prerogatives. They declare they are as competent 
to handle the tariff as any commission, but it is not a question of 
competency, but rather one of time in which to study, investigate 
and consider a myriad of details. Congress has no more time to go 
into these details than it has to dig post holes. Still we have no 
commission at this time, and it is the task of Congress to show the 
country what it can do in the w^ay of turning out tariff legislation 
that gives the public a fair deal while treating the industries with 
what^ let us say, is fair generosity. 

Can many of the duties in the present tariff be pruned without 

(267) 



4 The Annals of the American Academy 

doing violence to the protective principle ? I believe that any reason- 
able man will answer this question in the affirmative. Protection 
is granted for the purpose (i) of enabling new industries to estab- 
lish themselves and (2) to offset for labor in industry in general the 
difference between labor cost at home and abroad. For the first 
purpose high duties are considered needful, but it cannot be argued 
that these high duties should last forever. If the ''infant" industry 
does not become lusty and mature after the lapse of some years, 
then it would seem to be an indication that it is constitutionally 
incapable, in which case taxation in its behalf is worse than money 
thrown away. On the other hand if it does become healthy and 
strong and able to stand without props, then it is time for the 
props to be taken av;ay. The magnificent showings of our statis- 
tical tables are rather convincing evidence that the most of our 
industries are able to stand on their own feet at this time, and very 
little has been heard for years about infant industries. The natural 
inference is that quite a number of our tariff duties can be scaled 
without doing violence to the protective system. 

The second purpose of protection given above, that of offset- 
ting the difference in labor cost at home and abroad, is the 
more important. The standard of w^ages being higher in this 
country than abroad, the cost of production is correspondingly 
higher. To enable many of our products to compete with the 
foreign product, some measure of protection is essential, and 
the country can well afford to tax itself in order to protect its 
labor against the cheaper labor abroad and to maintain the Ameri- 
can standards of living. Still it is instructive to note that no 
country is richer in natural resources and human energy than this, 
and as a consequence there are some of our industries at least which 
are able to pay American wages and still compete with the foreigner 
without assistance. An examination of the tariff schedule readily 
discloses that many of the items more than liberally provide for 
the difference in labor cost at home and abroad, and once more the 
inference enforces itself on our minds that there are many duties 
that can be pruned without endangering the protective principle. 

It is an abuse of the protective principle, an inexcusable breach 
of the public trust, for private interests to enjoy the taxing power 
to a greater extent than what is fairly needful for their protection 
against foreign competition. 

(268) 



Tariif Revision a Public Necessity 5 

Sometimes it so happens that competition between home pro- 
ducers operates in time to ehminate in whole or in part the advan- 
tages which an industry may have once derived from a tariff duty. 
The duty ceasing to be a "means for the taxing of the pubHc for the 
protection of the industry, no longer serves any useful end on the 
statute books, and becomes a temptation for the elimination of com- 
petition between the home producers, so that they may again make 
it an active agency for taxing the public. Frequent charges are 
made that various duties have thus become ''trust" protectors 
instead of ''infant" industry protectors, all of which goes to show 
that there are various sorts of abuses which may grow up under 
a protective tariff which is not amended from time to time. 

It being a practical certainty that many duties can be lowered 
without ruinous invasion of the home market by the foreigners, it 
may at once be concluded that tariff reduction is the just policy to 
pursue. But there is another and very important phase to the situa- 
tion which is entitled to careful consideration, and which suggests 
the advisability of adopting a plan whereby we may secure the 
reduction of foreign tariffs while reducing our own. Quite a 
number of our industries have reached a point of development where 
they are capable of a greater production than the home market 
demands, and the number of such industries will increase in the 
future. These industries should have a foreign outlet for their 
surplus production, and it is just as important, if not more so, that 
their natural growth be not checked as it is that new industries be 
assisted to a self-sustaining basis. Tariffs are now largely a mat- 
ter of international agreement, and to secure reductions in duties 
of foreign tariffs on goods we can export, we should be in a posi- 
tion to offer in return concessions in our own tariff. Hence the 
force of adopting both a maximum tariff and a minimum tariff, with 
sufficient margin between them to allow for the making of reci- 
procity treaties. The value of a permanent tariff commission to 
assist in the execution of this plan for international agreements 
ought to appeal forcibly to the country. 

In tariff negotiations with other countries we must make up 
our minds that it will be necessary to offer genuine concessions, 
and therefore it is essential that the minimum tariff be made as low 
as possible consistent with the absolute requirements of the pro- 
tective principle. The present tariff could well serve as the maxi- 

(269) 



6 The Annals of the American Academy 

mum tariff. Possibly some of the duties could on reasonable 
grounds be raised for this purpose, but any attempt to make the 
present schedule practically the minimum schedule would make the 
new legislation nothing but a farce. The free list should be consid- 
erably enlarged in the minimum tariff, particularly as relating to 
raw materials — it is well to remember that one of the ways to build 
up home industries is not to tax the raw materials they use and also 
it is a senseless policy which puts a premium on the rapid exhaus- 
tion of our natural resources. 

While there are many other things beside the tariff which are 
responsible for good or bad times, yet the tariff has its effect, and it 
will tell for prosperity to put our tariff system on a business-like 
basis and to make such changes in the law as will make the burden 
of .taxation no higher than is needful for carrying out a fair and 
honest protective policy. 



(270) 



WHAT PROVISIONS OF THE DINGLEY TARIFF 
REQUIRE REVISION 



By Albert Clarke^ 

Secretary of the Home Market Club and former Chairman of the United 

States Industrial Commission. 



For three years there has been a growing demand for a 
revision of the tariff, and now that the occasion is riper than it 
was, revision has been agreed upon and the preliminary work 
begun. I have been trying all the while to have some immediate 
revisionist file a bill of particulars, but without success, except that 
a few have said the iron and steel duties are too high, wool and 
woolens require overhauling, the lumber, pulp and paper duties 
should be repealed or reduced, all important raw materials should 
be put in the free list and reciprocity should be promoted. Most 
of these suggestions have been made in general terms and by men 
not engaged in the industries proposed to be affected. The time 
is now at hand when suggestions must become definite to be of 
any value. 

The Republicans having resolved to maintain the policy of 
protection, and the Senate being assuredly Republican for four 
years, it is easy to prognosticate that whatever the Democratic 
policy may be (this article is written prior to the Denver con- 
vention), the revision that will take place will seek to readjust 
duties and regulations, bringing them up to date, rather than to 
enter upon any change of policy. All the free traders and many 
protectionists, however, think there should be a general reduction 
and few or no increases. Investigation has convinced me that they 
will have to be disappointed if Congress carries out the Republican 
promise, and this because of facts which I will proceed to state. 

The present tariff was enacted in 1897. Except in one or two 
cases of the accumulation of several years' supply of imported 
products under its predecessor, it was in normal operation by 1900. 
The test of a tariff as to whether or not it is too high, or not 
sufficiently protective, is seen in the imports of a series of years. 

(271) 



8 The Annals of the American Academy » 

The following table of our principal competing imports in 1900, 

1904 and 1907, which have been coming in over the Dingley 

duties in increasing volume, is the briefest possible statement of 
the items that suggest the possible need of higher rather than 
lower duties: 

Competing Imports Which Have Increased 

1900. 1904. igoy. 

A-Utomobiles and parts of $4,041,025 

Bone and horn, manufactures of $271,893 $249,515 292,073 

Books, music, etc 1,551,966 1,907,617 3,072,127 

Brass, manufactures of 24,816 56,796 

Breadstuffs, total 1,803,729 3,247,503 5,892,968 

Brushes 977,513 1,372,227 1,586,556 

Buttons and forms 592,501 892,612 936,085 

Coal tar colors and dyes 4,890,072 4,918,503 5,635,001 

Mineral waters 662,022 860,678 1,053,976 

Potash, muriate 1,804,254 2,407,957 3,860,555 

nitrate 269,739 366,526 400,200 

total 3,437,160 4,403,794 6,289,342 

Soda, total 5,908,611 9,821,666 14,481,740 

Chemicals, total 53,705,152 65,294,558 82,997,914 

Chocolate, manufactured 240,141 426,486 830,611 

Clays, dutiable 926,111 1,191,291 1,846,289 

Clocks and parts of 344,440 621,239 610,060 

Watches and parts of 1,406,111 2,369,235 2,983,113 

Cocoa, manufactured 313,561 300,409 371,816 

Bagging, dutiable 318,417 263,680 1,218,346 

Bags, jute 1,327,215 1,307,231 4,330,530 

Cordage 68,920 384,961 407,997 

Burlaps 10,606,185 14,630,647 29,113,847 

Total dutiable, manufactures of fibres.. 30,974,034 39,221,694 67,028,070 

Fish, total dutiable 6,426,817 8,610,653 10,780,075 

Fruits, total dutiable 9,744,413 10,806,572 13,944,094 

Nuts, total dutiable 12,020,300 14,720,100 21.345,833 

Furs and manufactures of 5,413,3 17 5,757,129 8,972,600 

Glass and glassware 5,037,93i 6,583,168 7,596,631 

Glue 537,492 598,546 596,667 

Gunpowder and explosives 383,150 730,86l 1,211,308 

Hair, manufactures of 248,226 87,476 565,603 

Hats of straw, etc 7ZA,^Z2 i,237,i55 2,832,226 

Hides of cattle 19,408,217 10,989,035 20,649,258 

Hops 713,701 1,374,327 1,974,900 

Copper, manufactures of 37,569 35,929 82,542 

Cork, manufactures of 464,658 810,733 1,707,930 

(272) 



Required Revision of Dingley Tariff 

1900. 1904. 1907. 



Cotton, manufactures of: 

cloths, bleached or dyed 8,156,301 

clothing, except knit 1,231,231 

knit goods 4,715.762 

laces, edgings, etc 19,208,165 

thread, yarn, not spooled 5,272,491 

total manufactures of cotton 41,296,239 

China, not decorated 1,081,685 

decorated 7,176,659 

Eggs 8,741 

Emery, ground 28,317 

wheels, files, etc 11,485 

Feathers, not dressed 1,736,458 

dressed 1 17,265 

artificial, and fruits 2,225,202 

Flax, dutiable 1,646,274 

Hemp, dutiable 450,269 

India rubber, manufactures of 818,420 

Iron and steel : 

ores 1,497,022 

pig 2,109,501 

bar -. 1,028,877 

rails 83,738 

hoop 31,749 

ingots, blooms, slabs 1,389,028 

wires and manufactures of 386,316 

machinery 3,569,096 

other manufactures of 1,671,899 

total iron and steel 11,767,226 

Ivory, manufactures of 49,418 

Lead, pig and other 3,142,469 

manufactures of 13,781 

Leather 132,674 

manufactures of 6,773,024 

Marble and manufactures of 812,606 

Stone and manufactures of 215,944 

Matches 156,705 

Matting of straw, etc 2,674,911 

Meat products 47i,3i5 

Dairy products 1,814,068 

Metals and composition 4,791,493 

Musical instruments and parts 1,090,541 

Animal oils 273,367 

Mineral oils, free 217,405 

dutiable 3,042 



8,144,383 


12,727,769 


2,505,035 


3,771,188 


6,044,691 


8,671,848 


24,848,764 


39,756,502 


5,060,533 


6,940,261 


49,524,246 


73,704,636 


1,337,381 


1,257,051 


10,193,072 


11,885,680 


61,458 


26,276 


90,932 


216,061 


12,547 


17,749 


2,742,018 


4,401,131 


171,339 


1,772,380 


2,432,496 


3,332,004 


2,541,874 


2,254,112 


869,260 


1,534,371 


1,157,042 


2,519,661 


1,593,277 


3,660,449 


4,047,167 


15,654,767 


1,366,097 


1.669,165 


1,190,536 


133,936 


70,281 


129,100 


3,398,692 


3,033,928 


722,580 


1,330,852 


3,184,968 


4,963,429 


3,976,250 


3,057,449 


19,549,848 


33,633,075 


74,497 


69,544 


3,838,734 


4,364,890 


2,788 


20,832 


772,610 


597,449 


6,190,984 


12,322,248 


1,408,433 


1,569,476 


263,941 


376,786 


230,867 


201,927 


3,609,795 


3,769,202 


844,960 


936,397 


3,352,506 


5,832,035 


6,337,823 


10,325,446 


1,366,285 


1,498,724 


638,591 


344,358 


247,906 


1,140,734 


32,840 


165,132 



lo The Annals of the American Academy 

1900. igo4. igo^. 

Olive oil, refined 1,170,871 1,875,825 3,523,725 

Paints and colors i,535,46i 1,674,193 2,013,481 

Paper, except lithograph and parchment 3,795,645 5,3i9,o86 10,727,885 

Perfumeries 533,411 853,135 1,250,855 

Pipes and smokers' articles 301,959 704,631 1,126,635 

Rice, dutiable 1,875,609 1,869,338 2,118,147 

Silk, manufactures of: 

clothing 1,657,641 2,805,804 5,218,620 

laces and embroideries 3,206,857 4,864,318 6,646,902 

ribbons 1,811,644 1,978,013 1,816,582 

velvets, etc 2,316,115 1,702,486 2,652,034 

total manufactures of 30,894,373 3i,973,68o 38,653,251 

Soap 623,144 900,841 973,286 

Spirits, wines and malt liquors : 

*"alt 1,727,256 2,313,325 3,408,763 

distilled 3,609,831 4.957-507 6,886,691 

wines 7,421,495 9,391-870 11,808,781 

Straw and grass, manufactures of 336,287 508,358 725,861 

Sugar, total 100,250,974 7i,9i5,753 92,852,253 

Tobacco and manufactures of : 

leaf 13,297,223 16,939,487 26,055,248 

manufactures of 2,364,137 3,133,859 4,137,12/ 

Toys 2,923,984 4,977,389 6,993,561 

Vegetables 2,935,077 7,008,602 5,728,472 

Wood -and manufactures of: 

sawed lumber, dutiable 7,495,509 8,878,474 16,255,350 

pulp 2,405,630 3,602,668 6.348,857 

total dutiable, manufactures of 14,635,340 18,565,180 31,576,546 

Wool and manufactures of: 

Class I — clothing, dutiable 8.009,985 8,573,494 21,378.304 

Class 2 — combing, dutiable 2,633,721 2,819,822 3,235,281 

Class 3 — carpet, dutiable 9,617,230 13,420,275 16.920,443 

total unmanufactured 20,260,936 24,813,591 41,534,028 

Manufactures of: 

clothing, except knit 992,619 1,309,995 1,674,915 

cloths 5,129,529 4,158,597 5,732,200 

dress 5,872,085 8,205,835 9.240.245 

knit 495,961 515,747 210,856 

shoddy and noils 86,887 52,697 271,116 

yarns 129,688 112,925 154,668 

total manufactures of 16,164,446 17,733,788 22.321,460 

Total dutiable imports $482,704,318 $536,9=;7.i3i $790 391,664 

Per cent of free 43.21 45 82 44-90 

(274) 



Required Revision of Dinglcy Tariff II 

The table shows that before the panic of October, 1907, there 
was a steady and in many cases a large increase in imports. It 
covers more than three-quarters of the total dutiable imports. It 
proves conclusively that the duties are far from prohibitory, and 
that in some cases they are not adequately protective, if protection 
is to be the policy of the country. Some increase was natural, 
owing to gain in population and purchasing power, but domestic 
industry should be allowed to meet most of the increasing demand, 
hence Congress will naturally take each case of large increase and 
inquire whether or not the prosperity of the domestic production 
of the article has been affected. 

Anticipating that inquiry, I have by circular asked one thousand 
manufacturers and merchants what tariff changes the experience of 
their own business suggests. In replying, a few have followed the 
vogue of the last three years and in general terms recommended 
reduction all along the line, giving no specific reasons for it, and 
not confining themselves to their own business. This, of course, 
is not helpful. Many, however, particularize and in most cases 
show that present duties should be increased, or the classification 
or basis of computation changed, or that customs regulations should 
be modified so as to effectuate and not defeat the law. This infor- 
mation, like the foregoing table, will doubtless be a great surprise 
to most of those who have called for reduction, and yet no honest 
protectionist can ignore or lightly consider it, because it is the result 
of experience. As briefly as possible I will specify some of the 
changes thus far suggested. 

I. Lithographs (included in ''books, music, etc," in the fore- 
going table). The importation has doubled in seven years, although 
our people are amply equipped to meet their own needs. There is 
an obvious incongruity in the duty of 20 cents a pound on paper not 
exceeding .008 of an inch in thickness, and only 8 cents on paper 
between .008 and .020, exceeding 35 square inches in size and less 
than 400 square inches ; for show cards 16 x 24 of the first class, 
weighing 100 pounds per 1,000, bear a duty of $20, while an equal 
number and size on a slightly heavier paper, say .009 of an inch 
thick, weighing 112 pounds, bear a duty of only $8.96. Then if the 
size is changed to 416 square inches, the duty is ad valorem. There 
are no technicalities in the business which call for these distinc- 
tions. Congress can easily substitute a compound duty which will 

(275) 



12 The Annals of the American Academy 

be simpler and more effective. The wage of a skilled lithographer 
in Germany is about 30 marks ($7.14) a week. Similar work here 
commands $22.00 to $50.00. 

2. Brushes. It will be seen by the table that the import has 
increased 60 per cent under present duties. A western manufac- 
turer writes that his strongest competitors are now the Japanese. 
Their wages do not average more than 25 cents a day, while he pays 
an average of $1.55. Clearly the duties need raising if labor is to 
be protected, and certainly $1.55 a day is not too much, where skill 
is involved. 

An eastern manufacturer writes that imports are one-fourth 
of the country's supply. He thinks that instead of being reduced 
the duty should be raised to 50 per cent for protection against 
Europe alone. It is now 40. 

3. Brush Fibres. Tampico or istle is now in the free list and 
should remain there, because it is not produced in this country. It 
is dressed in this country by machinery made at Burlington, Vt., 
which does better than hand work and at one-half the expense. 
This industry is protected (partially) by a duty of 20 per cent. It 
has recently transpired, however, that in England the purchasers 
of this machinery cannot afford to operate it, although the wage 
paid is only one-half that paid here, because of the competition from 
Germany and Belgium where wages are so much lower. Do these 
facts suggest lower or higher duties in the United States? 

4. Cotton Manufactures. With a larger and better equip- 
ment in this country than ever before, seventy-three million dollars* 
worth of cotton goods were imported last year. The table shows 
great increases of nearly all kinds. Thus far not one manufacturer 
or merchant has specified to me a duty that he thinks can be reduced 
with safety, but two have said that the coarse goods would suffer 
least from it. Laces, edgings, embroideries and fancy weaves are 
the newest domestic cotton manufactures, and they have to compete 
with almost the cheapest labor in Europe. This competition has 
practically doubled in the last seven or eight years. The same is 
true of cotton knit goods, especially under the new administrative 
arrangements with Germany and France. Yet prices have not 
increased correspondingly with the prices of raw cotton and other 
supplies and with wages. 

Last year's import of cotton manufactures equaled the total 

(276) 



Required Revision of Dinghy Tariff 13 

production of three of the largest cotton manufacturing cities in 
this country — Fall River, Lowell and New Bedford. It nearly 
equaled the product of Maine, New Hampshire and Rhode Island 
combined. It surpassed the product of all the Southern states ex- 
cept the two Carolinas, and of all the Middle and Western states 
combined. It is a tremendous fact to be reckoned with, and as 
cotton machinery has been very largely increased during the last 
five years in England, Germany, Italy, and Japan, and the cost of 
ocean transportation is so small as to afford little or no protection, 
what changes in our duties do these facts suggest ? 

5. Clocks and Watches. The introduction of American 
machinery in Europe has naturally resulted in an increased import 
of watches. Sales of certain American watch movements abroad 
at lower than home prices and their reimportation for advertising 
purposes (as is claimed by domestic manufacturers), have created 
some public demand for lower duties. The great Waltham works 
are now closed for want of orders. Domestic manufacturers have 
not yet indicated what, if any, changes in duties are needed. Prices 
are so low that every citizen can own a good watch if he is in the 
least thrifty. 

6. Corundum. Nearly all the pure corundum that is used in 
this country comes from Canada and pays a duty of $20 a ton, 
which is considered to be for the protection of a patented artificial 
product which is said to be marketed under restrictions that amount 
to favoritism. A manufacturer of grinding wheels thinks the present 
duty a misapplication of protection. 

7. Fibers and Manufactures of. The large increase in the 
import of jute bagging, bags and burlaps does not seem to cause 
domestic manufacturers to ask for a change of duties, but probably 
the anomaly of the situation will of itself call for investigation by 
Congress. 

8. Hides of Cattle. The agitation of this subject two or three 
years ago quieted down after the Democratic leaders in Congress 
gave notice to the shoe manufacturers that they would not consent 
to a repeal of the 15 per cent duty without a guaranty of reduction 
in the prices of shoes. As the shoe and harness industries have 
greatly prospered, the duty is not considered a serious burden, 
and the agitation for its repeal was largely political. One of the 

(277) 



14 The Annals of the American Academy 

worst effects of the duty grows out of the drawback on exported 
leather. The foreign buyer demands and usually gets a concession 
of the whole or a part of this drawback and thus has an advantage 
over the domestic buyer. A large manufacturer of shoes suggests 
that if the duty cannot be repealed the drawback had better be. 

9. Iron and Steel. The greatest demand for revision has been 
directed against the iron and steel schedule. It is the cause of the 
agitation carried on by the National Association of IManufacturers, 
which is dominated by the vehicle and implement and agricultural 
machinery manufacturers and some other large consumers of iron 
and steel. They claim that by reason of the duty, or of combination, 
or both, the iron and steel producers have been making excessive 
profits, although their calculations do not allow for the cost of 
developing mines and transportation facilities and the substitution 
of new for old processes. Neither have they given the producers 
credit for maintaining steady prices during a period of great and 
increasing demand, when higher prices could have been exacted. 

It remains to be seen what effect the reduction in prices on 
sheet and tin plates, which was made early in the year, and on iron 
ore, billets, sheet bars, plates, structural iron, merchant pipe and 
wire nails, which was made on the 9th of June, will have on the 
demand for a reduction of duties. The above table, however, 
shows considerable gains in imports of nearly all iron and steel 
shapes, and as there are European syndicates formed for the pur- 
pose of aggressive exploitation of foreign markets, changes should 
come only after exhaustive inquiry, if at all. 

Although the largest corporation in the world has been formed 
in this industry, domestic competition and foreign competition have 
both increased under present duties, and if the duties are reduced 
the domestic competitors of the so-called trust will be likely to suffer 
more than the trust itself. This was the testimony of many inde- 
pendent manufacturers before the industrial commission. The force 
of this domestic competition, which is claimed as one of the triumphs 
of the protective policy, is seen in the recent reduction in prices. 
There are people w^ho think that American industries, whether 
combined or not, which cause an economic price by large develop- 
ment and by concessions to normal market conditions, are of more 
importance to the country than any possible benefits derivable from 
abroad. 

(278) 



Required Revision of Dinglcy Tariff I5 

10. Oil, Mineral. It has been suggested, not from the indus- 
tries, but by tariff reformers, that a fraud was perpetrated upon the 
country by adding an exception to the mineral oil clause in the free 
list, making the import dutiable when it comes from a country 
which puts a duty on our oil. There does not seem to be proof of 
any fraudulent intent, and the reasonableness of the exception is 
evident. The import of dutiable oil, though small, has largely 
increased and there is a much larger import of free oil, which shows 
that the claim that only one country could send it to us is not true. 
It should be borne in mind that the Standard Oil Company is not 
the only domestic producer and that if it were it is entitled to justice. 
The relative smallness of the import to the domestic product, how- 
ever, makes the duty too small to talk about. 

11. Paper and Pulp. The unfinished hearing by the Mann 
committee went far enough to convince the majority that the duty 
is not responsible for the advance in price and that if it were repealed 
or reduced, foreign exporters and not domestic consumers would get 
the benefit. The demand for repeal was made by well-known 
advocates of free trade, who had become officers of the American 
Newspaper Publishers' Association, and although the association 
gave them authority to attack the duty, the facts had not then been 
developed, and many of the members now sustain the committee's 
finding. In the general revision there may be some change in the 
duties, but no change is probable which will aim a blow at the pulp 
and paper industries. 

12. Silk. Not one recommendation has been received for 
modifying the silk duties. Although the import is still large, the 
domestic product has steadily increased and become so variegated 
that only special patterns now need to be brought from abroad. It 
is a testimony at once to the wise adjustment of the duties and to 
the enterprise and skill of American manufacturers that this impor- 
tant industry is so well established and so prosperous and that its 
products are so reasonable in price that no demand seems to have 
arisen for any important changes of duty. The industry has 
fully justified its protection. The value of the domestic product 
has increased from $87,298,454 in 1890 to $133,288,072 in 1905. 

13. Starch. The duty, i}4 cents a pound, applicable also to 
all preparations used as starch, was collected for a year or two and 
then by some strange ruling it was no longer applied to tapioca 

(279) 



l6 The Annals of the American Academy 

and sago flours, which are largely used as substitutes for potato 
and corn starch. The import of these flours last year was 58,391,- 
075 pounds. The government lost its revenue and the starch- 
makers lost their protection. Starch making is threatened with ruin 
unless this mistake in administration is corrected. 

14. Sugar. Strictly this article does not belong in the forego- 
ing table of imports which have increased, because sugar imports 
have declined, but I wish to call attention to the fact that they are 
still large. Our sugar beet production has increased so rapidly as 
to indicate a continuance of present duties. In 1905 there were 
fifty-one establishments^ with a daily capacity of 35,900 tons of beets. 
They were located in fourteen states and territories. In five years 
there was an increase of 70 per cent in the number of establish- 
ments, 177 per cent in the capital, loi per cent in the number of 
wage earners, 127 per cent in wages paid, and 233 per cent in the 
value of the product — all this in spite of freer importation of cane 
sugar from our insular possessions and from Cuba. The only 
demands for reducing the duties are from consumers or competitors, 
and they are much less insistent than they were a few years ago, 
because the increasing supply tends to reduce the price. 

15. Wood and Manufactures of Wood. There has been a great 
demand for reduction or repeal of the duties on lumber, on account 
of the large advance in price and a fear that we are too rapidly 
using up our supply. It is now admitted, however, that the price 
is not chargeable to the duty, for it remained the same for some time 
after the duty was enacted, and that if the duty were to be taken off 
the price would remain the same while the demand is great. The 
only effect of repeal, therefore, would be that our treasury would 
lose the duties and foreign exporters would save them. It should be 
added that this would slightly conserve our forests, but only at the 
expense of employment. Logs for boards and pulp are already 
admitted duty free. 

Where scientific forestry is practiced there can be a large 
annual cut without exceeding the growth, and it would seem that 
this is the direction which the legislation should take rather than 
repealing the duties and turning one of our largest industries over 
to Canada. In 1905 there were in all parts of the country 19,127 
saw and finishing mills, with a capital of $517,224,128, employing 
404,626 wage earners, and turning out a product valued at $580,- 

(280) 



Required Revision of Dinglcy Tariff ly 

022,690. This does not include the great industry of logging, in 
which there were 12,4.C)^ establishments, with a capital of $90,454,- 
494, and employing 146,596 wage earners, to whom $66,989,795 
were paid. 

In view of the magnitude of the industry, its existence in every 
state and territory, the means which are coming into use for pre- 
venting waste and the planting that is taking place, besides the 
certainty that a repeal of duties will not reduce the price, the only 
recent suggestions of change in the tariff are to oft'set any export 
duty which the Canadians may place on logs. It cannot be known 
in advance precisely what form this should take. 

16. Wool and Woolens. This is the most difficult schedule 
in the entire tariff, because wool growing must be protected and 
manufacturers must be allowed an extra duty to compensate for it. 
The present schedule is the result of years of conferences (battles 
some have called them) between the growers and the manufacturers 
and of long study by experts and by committees of Congress. While 
some of the manufacturers would like lower duties, particularly 
on carpet wool, and while dealers as well as manufacturers would 
like to substitute an ad valorem duty for a specific duty on heavy 
shrinkage wools, so that they would not have to pay for grease and 
dirt, yet the difficulties of agreeing are so great that most of them 
say they prefer a continuance of existing arrangements to the evils 
that they know not of. In products which have to compete with 
cotton goods, like hosiery, the wool duty is said to force a large use 
of poor shoddy, but just how to remedy it and still protect wool 
is an unsolved problem. 

Notwithstanding other branches of agriculture have been in- 
creasingly profitable and tempting, sheep husbandry has held its 
own and gained moderately as a result of protection. The gain 
would have been much larger, especially in New England, New 
York and Ohio, but for the dog nuisance. An increase of sheep 
for both wool and mutton is most desirable, hence, in the interest 
of consumers, tariff changes of a discouraging character should not 
be made. 

The woolen and worsted manufacture has made gratifying 
progress. In 1905 the capital employed in it was $370,861,691, the 
wages paid $70,797,524, and the value of the product $380,934,- 
003, the last item showing a gain of 28.3 per cent in five years. 

(281) 



i8 The Annals of the American Academy 

Improvement in the quality of the product was equally marked, 
some of the mills now turning out cloths that compare favorably 
with the best made abroad and at lower prices. 

It remains true, as demonstrated by Senator Aldrich in 1894, 
that if the whole duty on wool were added to the cost of a five 
pounds suit that ordinarily retails for $20, it would increase the 
cost only about sixty-five cents, and most of it would be shared 
by the manufacturer and dealer. 

17. Works of Art. There seems to be a more general demand 
than ever before for a repeal of the duty on works of art. It was not 
designed and has not been maintained for protection, but for revenue 
only, although this has not been generally understood. Such works 
usually become a valuable possession of the public after a period 
of private ownership and are generally enjoyed by the public from 
the first. There will certainly be no opposition to the repeal on the 
part of protectionists. 

Whether the duty is removed or not, the law should be amended 
so as not to exempt articles involving a great deal of labor, like 
large, polished and elaborately carved marble altars (not antiques), 
which are now made in this country at more than twice the foreign 
labor cost, and which are manufactures rather than products of 
individual genius. 

18. Scientiiic Instruments. The exemption from duty of 
scientific instruments for educational institutions greatly discour- 
ages their production in this country, although the manufacture 
here is able to meet nearly every need. There is complaint of the 
injustice of requiring an industry that has to be conducted under the 
conditions of protection to sell under the conditions of free trade. 

19. Better Administrative Features. The modifications of the 
treasury regulations embraced in the compact with Germany and 
since extended to other nations have developed strong opposition, 
and without doubt several changes in the law will be proposed 
to secure an execution according to its purpose. This subject is 
highly controversial and suggestions will necessarily await the 
testimony of experts. 

20. A Customs Court. A leading New York business journal 
has recently proposed that a customs court be established, so as to 
relieve the over-worked district and circuit courts and secure a 
more prompt and expert decision of cases that are appealed from 

(282) 



Required Revision of Dingley Tariff 19 

collectors and the board of general appraisers. This has for some 
time been a growing need and Congress will be likely to give it 
careful consideration. 

The foregoing suggestions are presented as indicative rather 
than comprehensive. Once revision is entered upon there will be 
recommendations of many small changes, some of which will un- 
doubtedly be found meritorious. 

Rates and regulations which take into account only the differ- 
ence between foreign and domestic labor cost are not up to date. 
When a foreign state-owned railroad carries goods for export at 
only one-half its domestic rates^ it practically pays a bounty to its 
producers for exploiting foreign markets. Why should not that 
indirect bounty be offset by an extra duty, the same as a direct 
bounty is now? It is a practice for railroads and steamships to 
make joint rates on through bills of lading, and this has caused 
millions of dollars' worth of foreign goods to be. delivered through- 
out the trunk and gulf line territory of the great Central West at 
a lower cost for freight than domestic industries can secure -for a 
much shorter haul. Thus European crockery is delivered at St. 
Louis, Chicago and St. Paul for a smaller freight charge than is 
made to those points from Trenton, New Jersey. This practice must 
be broken up or protection w411 be largely nullified. 

It seems appropriate to say in conclusion that if the protective 
party is again intrusted with power its revision should be based 
upon facts, and not upon clamor raised by the other party. If the 
facts do not justify reduction but call for increase, the party must 
have "the courage of its convictions." It has been common to say 
that only principles and not schedules are sacred. Schedules, how- 
ever, become the expression of principles and are just as sacred 
as any other law while they last. Rates must be sufficient or pro- 
tection fails. 



(283) 



WHAT OUGHT THE TARIFF RATES TO BE ON IRON 
AND STEEL MANUFACTURES? 



President, A. B. Farquhar Company, Limited, York, Pa. 



The question, what ought any tariff rate to be? is one that 
cannot be satisfactorily answered in the absence of an accepted 
criterion of the "ought" — an understanding to whom exists the 
obHgation imphed in the word, and how that obHgation was 
incurred. Without such a criterion and understanding our hands 
are tied at the very outset. We might Hsten to those who would tell 
us that the paramount obligation of government is to vested rights 
— however they may have come to be vested — and so be convinced 
that no tariff ought to be changed without the free consent of the 
beneficiary. We might be persuaded by those, on the other hand — 
fully equal to our first supposed advisers in patriotism and intelli- 
gence — whose fundamental maxim is that government has no right to 
limit the liberty of any citizen further than is necessitated by the 
equal rights of other citizens, that any tariff rate at all, higher than 
is needed for the bare existence of government, is an infringement 
on the people's rights. From either of these antagonistic points of 
view the question is already settled, without argument. The fact 
that it is proposed for discussion evidently indicates some inter- 
mediate criterion, which should be strictly observed and distinctly 
stated. 

For the purpose of this discussion I shall therefore assume, 
without undertaking to prove them, the following postulates : 

(i) The continued production of iron ores, of pig iron, of 
ingot steel, and of iron and steel manufacturers in the United 
States, in some such quantity as at present, is desirable. 

(2) Therefore, any diminution of the tariff duty on such 
products, as will by cutting down the profits of production consid- 
erably reduce the amount produced, is not desirable. 

(3) But any diminution that will not considerably reduce pro- 
duction is desirable in proportion as it makes the completed manu- 
factures cheaper to the consumer. 

(284) 



What Ought the Tariff Rates to he? 21 

(4) Accordingly^ the tariff rates ought to be reduced to the 
extent thus defined, no further. 

In the practical application of these assumed principles, we 
meet with the difficulty that the information particularly required 
can be had only by experiment, and that no experiment under pre- 
cisely corresponding conditions has been made. But we can pretty 
safely infer, other things being equal, that if the cost of production 
in this country exceeds that in the best-equipped competing country 
by a certain amount, that product will continue to be produced if the 
duty is not reduced below that amount ; that if any product can be 
sold at a certain price, more of it will be in demand at a lower 
price; and that the more widely distributed the source of supply 
of any commodity, the less subject its price will be to sudden fluc- 
tuations. 

Inquiring what is the excess cost of production of iron and 
steel in this country, we find that for a full half of it no excess 
exists, and that for a considerable proportion there is a large differ- 
ence the other way. To the cost of pig iron, as produced by the 
United States Steel Corporation, we have some concurrent testi- 
mony: first, for 1899, that of a paper prepared for the British 
Institution of Civil Engineers by the Messrs. Head, afterward 
quoted with approval by Mr. J. S. Jeans, secretary to the British 
Iron Trade Association. According to which the cost of a ton 
produced in Pittsburg was 32 ^^ shillings, or $7.90, while that 
produced at Middlesborough cost 52 shillings 2 pence, or $12.70 — 
fully 60 per cent higher; second, the independent calculation in 
Mr. J. Russell Smith's recent article on ''Cost and Profits of Steel- 
Making," written in 1907, according to which the cost of material 
is $7.00 and the entire cost $8.00 for a ton of pig iron. I have review- 
ed ]Mr. Smith's figiires, and, though prepared to admit that his $3.00 
for ore may be somewhat too small, even though the corporation 
owns the mines and the transporting railways and steamer-lines, 
I am sure that his $4.00 for coke and limestone is decidedly too 
large. In the English estimate for 1899 the ore slightly exceeded 
$5.00, while the coke and limestone together amounted to but $1.80 at 
Pittsburg. True, coke sells anywhere from $1.00 to $4.00 a ton, or 
even higher in feverish states of the market, but its cost is another 
story. In fact, a properly managed coke oven will pay for all the cost 
of its raw material and labor, repairs and depreciation, with its 

(28s) 



22 The Annals of the American Academy 

by-products, gas, gas-tar and ammonia, leaving the coke without 
cost. Mr. Smith himself proves this by his figures, and after- 
wards appears to forget it in his estimate of cost. He would be 
quite right in rating this material as highly costly, calculating on 
the wasteful methods of preparation that have been heretofore too 
common in Pennsylvania. But with improved methods, the corpora- 
tion owning the coal mines and the ovens, he allows too much for 
it. For pig iron produced under the best conditions, as by the Steel 
Corporation or the Jones and Laughlin works, we might estimate 
the cost of iron ore at $3.75, instead of $3.00; that of coke and 
limestone at $1.75 instead of $4.00, "while the labor and maintenance 
charges add but another dollar," making $6.50 in all, which appears 
to me a decidedly closer estimate than $8.00. 

This, it must not be forgotten, is confessedly a "bottom figure ;" 
the top figure for cost is naturally the market price of the iron, 
which is usually $15 to $20 or over; and there may be all grades 
between. For an average cost we must refer to the figures of the 
United States census of manufactures, which show for 22-^ estab- 
lishments engaged in the manufacture of pig iron in 1900, reduced 
to 190 in 1904, the aggregate expenditures for salaries and wages, 
materials and miscellaneous, were respectively $159,755,409 and 
$210,555,407, producing 14,447,791 and 16,623,625 gross tons of 
iron, which therefore cost (without allowance for depreciation or 
repairs of plants) $11.06 and $12.67 P^^* ton. Of this total increased 
cost of $50,800,058, about 69 per cent ($35,042,447) was increased 
cost of ore consumed, and over 93 per cent ($47,438,263) was 
increased cost of all materials. 

Comparing the British cost of production at Middlesborough, 
quoted above, with the average just obtained from United States 
census data, we find a correspondence practically exact for 1904. 
If we assume British costs unchanged since 1899, ^"^^ other things 
equal, it would follow that more than half of the United States 
production in 1904 could have been sold without loss at free-trade 
prices. But there is no exact correspondence between the figures 
used in this comparison. The English figures include a small allow- 
ance for repairs, etc., which the United States census figures have 
not. But a more important difference between them is the date 
to which they apply, in years of rapidly advancing prices. In that 
view, the Middlesborough $12.70 for 1899 ought not to be com- 

.(286) 



What Ought the Tariff Rates to he? 23 

pared with the census $12.67 for 1904, but rather with the $11.06 
for 1900. 

The cost of labor at the furnace per ton of product is an item 
of some interest. The English estimates for 1899 put this at forty- 
nine cents for Pittsburg and seventy-three cents for Middlesbor- 
ough, the difference in our favor being due of course to greater 
use of machinery. Mr. Schwab is quoted by Secretary J. S. Jeans, 
of the British Iron Trade Association, as finding ''that the best 
record for labor, etc., at the blast furnace per ton of pig iron was 
41. 1 cents, which included . . . time-keeping and superinten- 
dents' salaries," etc. This was for the Edgar Thomson Works in 
1902. Mr. Frank Popplewell, of Manchester, in a "Gartside Schol- 
arship" report on a tour in this country in 1904, says of one of 
Messrs. Jones and Laughlin's furnaces in Pittsburg: "The labor 
charges for operating this plant were stated to be forty cents per 
ton of iron ; for repairs twelve cents per ton, and the total charges 
of labor, repairs, interest on investment, and depreciation, about 
$1.00 per ton. This figure will not differ greatly at any of the works 
in the Pittsburg district where the same state of efficiency holds in 
respect to equipment." Mr. J. Russell Smith uses the same esti- 
mates identically, as seen above, for the Steel Corporation's costs, 
apart from material. So much for the most favorable figures ; but 
figures less favorable could be given in abundance. In the same 
article Mr. Smith speaks of his investigation of "a comparatively 
small blast furnace," at which the labor cost "was for a recent year 
$1.17 per ton," and explains the difference by "the fact that the 
economical Pittsburg furnace did not make its pig iron into pigs,"" 
but carefully observed that by sending it "a splashing liquid straight 
from the blast furnace to the converter, there is a saving of $1.50, 
which would have been spent in making pigs and again melting 
them." This cost saved, of "making molds for the pig iron, 
running it into the molds, breaking it up, piling it, handhng it, and 
finally loading it into cars," is very largely labor-cost. In Penn- 
sylvania in 1906, by the report of the State Bureau of Industrial 
Statistics, 11,244,292 gross tons of pig iron were made at a total 
pay-roll expense of $12,063,566, or $1.07 per ton, which may or 
may not include salaries and office expenses. The wages per ton 
for the entire United States in 1904, by the census report, were $1.14, 
or, when salaries of officers, superintendents, foremen and clerks 

(287) 



24 The Annals of the American Academy 

are included, $1.31 ; the corresponding figures for 1900 having 
been $1.28 and $1.44. Three points seem to be made out by this 
examination : ( i ) That labor cost at the furnace is extremely vari- 
able in the United States; (2) that it is on the whole progressively 
diminishing, although the total cost of the iron is increasing; (3) 
that it forms but a minor part of the total cost of production, rang- 
ing from 5 or 6 per cent upward, about 10 per cent as an average. 

In stating my fundamental assumptions I intentionally left the 
admissible reduction of production, by lowered tariff rates^ some- 
what indefinite. Reasonable men may widely differ as to the 
amount, some dreading the effect of any unsettlement of present 
conditions and others trusting confidently to the law of supply 
and demand and to the adaptability and ingenuity of our fellow- 
citizens to weather any changes. Taking the figures exactly as 
they stand, and supposing pig iron admitted free of duty without 
another change in the tariff, the evidence that it would continue to 
be produced in the country at a price from $2.00 to $4.00 lower than 
at present, to an amount never equaled here until 1901 (that is, more 
than half the present production), and without serious inconvenience 
to the laborers of the country, amounts to complete demonstration. 
It would be quite possible to add some weighty reasons for the belief 
that the proportion of iron so produced would speedily increase, and 
that after a few years the temporary backset would be no longer 
noticeable ; but it would be unnecessary, for no one proposes to alter 
the tariff rates in that way. Any reduction of the rates on pig iron 
would be accompanied by a provision admitting iron ore free, w^iich 
would make no practical difference to the corporations owning both 
furnaces and mines, but would be a decided encouragement to the 
furnaces for which ores have to be bought. It would probably be 
accompanied, also, by reduced rates on steel, and iron and steel 
manufactures, which would doubtless increase the demand for ma- 
chinery and all iron w^are in the United States, and thus arrest any 
alarming fall in the price of the crude metal. If carried out in 
these ways, I am convinced that the effect of an entire removal of 
the duties on pig iron would be altogether for good, but I would 
cheerfully consent to abide by the results if half were removed now 
and the remaining half as soon as the first step should be clearly 
recognized as beneficial. 

With regard to the cost of production of ingot steel, there is 

(288) 



What Ought the Tariff Rates to be? 25 

very little to say further than Mr. J. Russell Smith has said in his 
Journal of Economics article. He lays stress, justly enough, on 
the wide differences for different establishments, and calculates the 
cost of conversion in Pittsburg at from $3.50 to $4, admitting that 
it might reach $7.00 per ton for plants of less efficient construction, 
equipment, and operation." This gives, as a bottom figure, but $10 
for steel ingots, adding to which $2.00 as the minimum for rolling 
steel rails, shows that the Steel Corporation could produce the rails 
for as little as $12 under the most favorable circumstances ; or, say, 
from $12 to $15 as a rule. A $16 price would assure the trust a 
moderate profit, whereas the price it asks is $28. For years our 
tariff was $28, but it has now, by successive reductions, fallen to 
$6.72. Since the English price is not less than $20, and since for 
twenty years the cost of manufacture has been less in Pittsburg 
than anywhere on the globe, there would be no harm in putting 
steel rails on the free list. 

Although most machinery and manufactures of iron and steel 
could by this time be admitted free without more than temporarily 
disturbing their production in the United States, so abrupt a change 
is not recommended at once. With free ores and pig iron, a gen- 
eral removal of half the duty could be made now without appreci- 
able embarrassment of manufacturing^ and this could be followed, 
gradually, by farther reductions. Free trade is the condition of 
stable equilibrium, toward which every adjustment should aim, be 
it slower or swifter in its action. 

It is objected by defenders of the present high-tariff system 
that a lowering of duties, while it would only diminish the profits 
of the great corporations, would drive smaller producers out of 
business altogether, and leave our manufacturing more in the hands 
of the trusts than ever. There is much truth in this. Competition 
is always driving trades from those less able, to those more able, to 
stand it. The practical question is: how much is this country pre- 
pared to pay, out of the daily earnings of its people, to keep these 
smaller producers in business? They can be kept going, as long 
as we are willing to reach into our pockets for the means. But 
the necessity, or even the desirability, of maintaining people in 
doing anything in which others can serve the public more effec- 
tively, I did not include among my fundamental postulates. 

(289) 



TARIFF RATES ON HARDWARE 



By Charles W. Asbury^ 
President American Hardware Manufacturers' Association, Philadelphia. 



Theoretically considered, tariff rates should represent the dif- 
ference between the cost of production in the United States and in 
foreign lands. From a protectionist's viewpoint there should be, in 
addition to this, a margin of safety to provide against varying condi- 
tions. The costs of production are continually fluctuating, for the 
obvious reason that costs of raw material and of labor are con- 
tinually changing. In times of great business activity the costs 
advance, and, generally speaking, in times of business depression 
the costs decline. Periods may come when the demand is far more 
active within our own borders than within the borders of our indus- 
trial competitors abroad. The tariff rates, therefore, should be 
sufficiently high to provide for these natural differences, and should 
be sufficient to fully protect those who work with their hands against 
the competition of the lower-priced labor elsewhere. 

The real difficulty in undertaking to arrange tariff schedules 
scientifically is to determine the cost of production. Manufac- 
turers of hardware have been giving most earnest study to ways 
and means of determining, with a fair degree of accuracy, their own 
costs. This is by no means a simple or easy task, especially if an 
attempt is made to manufacture a number of different lines of 
goods. It is comparatively easy to keep a record of the actual 
time of employees currently spent in the production of anything; 
but there are so many items of expense hard to apportion among 
the different lines, such, for instance, as supplies for the plant, non- 
productive help, etc. This apportionment must be the result of 
experience, and a corps of intelligent employees must be provided 
to keep currently the necessary records for use in determining 
costs. If, therefore, it be considered that the manufacturer him- 
self finds great difficulty in determining accurately his own costs, 
then it is but logical to conclude that any congressional committee, or 
any body created by Congress, would find it almost an impossi- 
bility to determine, with any degree of accuracy, w^hat the tariff 
rates should be upon the theoretical basis of difference in cost of 

(290) 



Tariff Rates on Hardivare 2y 

production here and abroad. In the case of hardware, it will be 
seen that the difficulties are magnified certainly beyond the average 
of other classes of manufactured goods. 

The term "hardware" includes a wide variety of articles, rang- 
ing from those usually looked upon as raw material, because of the 
small amount of finishing they require, to that class of article which 
is highly finished, and upon which the labor forms a very high per- 
centage of the total cost. 

It might truthfully be said that 5 per cent duty would be 
sufficient upon the former, although it might be, that the latter would 
require a protection of 100 per cent or more. This statement is 
made with a thorough realization of the theory of arranging the 
tariffs to provide for the difference in the cost of production, as 
above explained. 

There is probably little appreciation of the wide variety of 
goods usually classified as "hardware." As an illustration, a single 
item might be selected and divided into its correlative constituents. 
Take wire, for instance : First, we find wire in different metals — 
German-silver, aluminum, iron, steel, bronze, brass, tin, lead and 
solder. In iron and steel wire we have plain, galvanized and 
tinned. In copper and aluminum wire we have the large variety 
of insulated wires, as well as plain. We also have awl wire, baling 
wire, barbed w^ire, basket handle wire, belt hook wire, bookbindei- 
and bottling wire, broom and brush wire, bundling wire, button 
fastening wire, crimping wire, dental wire, and in addition a large 
variety of wire cords, ropes, cables and wire cloth, as well as a large 
list of articles in which wire constitutes the chief raw material from 
which they are made. 

It will be readily seen that the labor cost in many of these 
items is relatively higher than in others. Consequently if equi- 
table tariff rates should be desired upon wire, each kind, quality 
and size would have to be considered by itself, and a rate made in 
accordance with the theory first advanced, that is, covering the 
difference between the cost of production here and abroad, w^ith a 
fair margin to cover fluctuating conditions. 

It will, of course, be understood that we have selected but one 
item usually classified as "hardware," whereas there are really 
thousands of items within the classification, ranging from such low- 
priced items as nails, tacks, and screws, to highly finished and ex- 

(291) 



28 The Annals of the American Academy 

pensive goods, such as razors, tools and even watches and clocks. 
It is, therefore, unthinkable to attempt to answer succinctly the ques- 
tion, ''What ought the tariff rates to be on hardware?" 

This same reasoning would apply to many other lines upon 
which there is no specific classification under the laws which have 
been enacted. Generally speaking, the magnitude of the task of 
framing an equitable and just tariff law is little appreciated. The 
law-making bodies^ as at present constituted, cannot be expected 
to possess, or have the means of acquiring, the intimate knowledge 
of all of our industries, necessary for the enactment of scientifically 
perfect schedules in a tariff law. It has, therefore, been urged, in 
some quarters, that a permanent commission be created, with mem- 
bers appointed for life, or during good behavior, at salaries con- 
sistent with the responsibilities of the ofiice, and with powers to 
call witnesses and appoint special agents for investigations at home 
and abroad, in order that each item may be carefully considered 
upon its own merits, after a thorough investigation of all of the 
conditions surrounding it. 

The theory advanced by those who favor the creation of such 
a commission is, that it could keep well and currently informed as 
to each item and its fluctuating costs at home and abroad, making 
frequent reports to Congress of its findings, recommending the 
rates of duty which should be applied. It would be necessary to 
leave the ultimate fixing of rates to the Congress itself, but the 
reports and recommendations of the commission would probably 
be accepted by the public as dependable, and the maximum of con- 
fidence could, therefore, be placed in a tariff bill so created. Such 
a course, if adopted, would probably eliminate the cycle of business 
unrest which usually accompanies tariff agitation. 

At the last session of Congress a bill was introduced author- 
izing the creation of a commission as above described, and Senator 
Beveridge advanced some very pointed and logical arguments in 
favor of it. He quoted section 193 of the tariff act now in force, in 
which section a large proportion of the articles usually classified as 
"hardware" are entered for customs purposes. This section reads: 

Articles or wares not specially provided for in this act, composed wholly 
or in part of iron, steel, lead, copper, nickel, pewter, zinc, gold, silver, 
platinum, aluminum, or other metal, and whether partly or wholly manu- 
factured, 45 per cent ad valorem. 

(292) 



Tariff Rates on Hardware 29 

Referrinof to this particular section Senator Beveridge said : 

Under this paragraph our customs officers have subjected to a duty of 
45 per cent ad valorem, stoves, implements, electrical apparatus, gold and 
silver boxes, tin or brass boxes, brass tubes for bedsteads, brass sheets, bronze 
crosses for churches, bullets, bull's-eye lanterns, buttons with metal shanks, 
carriages, carts, railway cars, automobiles, cannons, chafing dishes, chisels, 
church bells, coal scuttles, nails, copper wire cranks and shafts, drawing 
instruments, dress trimmings in which metal is the material of chief value, 
dyes, tools, pistols and other firearms, etc. These are only a few instances 
taken from an alphabetical arrangement of the tariff decisions, there are 
thousands like them and even more absurd. 

Will anyone contend that a simple article like nails should have the 
same rate as an electric dynamo? 

Is there any logic in classing buttons and stoves together? 

Should bullets and buggies, should automobiles and bull's-eye lanterns 
pay the same duty? 

Are farm implements and gold boxes in the same class? 

Is there any connection between carriages and dress trimmings? 

Is there any reason why cannon for war, and crosses for churches 
should be classified alike? 

Yet all these are in the same classification and pay the same rates ; but 
more absurd than this is the fact that they are put in the same classification 
by the appraisers and the courts passing on each article because Congress 
did not classify them at all. Nobody knew what duties these articles would 
have to pay until the guess of the appraisers and the courts filled up the 
holes in the law. 

Much might be said in discussing the question of tariff broadly 
from a political standpoint, but I will refrain from any such attempt, 
confining myself to a business view of the subject. The present 
law has been severely criticised upon the ground that the average 
of its schedules is much higher than conditions warrant ; also upon 
the ground that its schedules are inequitable, some being excessively 
high, while others are inadequate to afford a reasonable measure of 
protection. 

Referring to the first objection, the protectionist says "it is a 
good fault." He fails to see the injustice of schedules higher than 
necessary. He argues that it makes little difference if It be 
admitted that the tariff rates should be thoroughly protective, 
whether or not higher duties are charged, because a protective tariff 
would minimize imports, and If the rate be higher than necessary, 
it will do no harm, because the same minimum applies. 

Of course, the answer to this is, that certain combinations 

(293) 



30 The Annals of the American Academy 

might control the production of those goods which were exces- 
sively protected, in which event it would be possible for them to 
maintain abnormally excessively high selling prices, and thus do 
a grave injustice to the public at large. When we reach this point 
it naturally opens the door for a discussion of the trust problem 
with all of its complications, and upon this it is not my purpose 
to enter. 

Referring to the second objection to the present law, namely, 
that its schedules are inequitable, this I think will be generally 
admitted, but it must be remembered that it is practically Impossible 
to frame a law which will provide equitably for the thousands upon 
thousands of items necessarily to be considered in connection with 
our total imports and the great variety of our manufactured goods. 

Some idea of the greatness of this problem might be had from 
the thought that nearly every object upon which the eye rests is 
included in the variety, and in order to provide equitable tariff 
rates, each single item would have to be figured separately, its cost 
of production obtained in some way, and the cost of the production 
of the same article in many foreign lands also ascertained. Such a 
task is almost too large for handling by the Congress of the United 
States or any other duly constituted body. It, therefore, becomes 
necessary to take certain aggregations of similar goods and com- 
bine them Into single schedules in framing the tariff bill. It would 
seem to me, therefore, that the present statute is not properly sub- 
ject to the severe criticism it has received. I am inclined to enter- 
tain a large measure of confidence in the ability of the men who 
framed it, although I am conscious of the fact that conditions 
have materially changed since its birth, and that a fair, reasonable 
revision would be beneficial. 

In conclusion I will make an attempt to answer the question, 
* What ought the tariff rates to be on hardware ?" in a general way 
by asserting my belief that the existing rates are not materially 
higher than they should be if fair, reasonable and equitable protec- 
tion is to be given to the Industries and their employees. For- 
tunately In the tariff question there can be no issue between employer 
and employee; their Interests are coincident and parallel. Upon 
this question labor certainly secures its full measure of benefit 
without assuming the risks incident to the investment in property 
necessary to the industrial employer. 

(294) 



HIDES, LEATHER, BOOTS AND SHOES AND THE 

TARIFF 



By a. Augustus Healy, 
Vice-President United States Leather Company, New York. 



As at present conducted, tanning hides into leather and manu- 
facturing leather into boots and shoes are separate industries, but 
for the purposes of this article they may be considered as one. 
Together they form a very great industry. There is none in the 
United States which is naturally more capable of successful devel- 
opment. There is none which has been more impeded by the tariff. 
This great industry now calls loudly for a reduction of the tariff. 
Especially does it call for the abolition of the duty of 15 per cent 
imposed on hides by the Dingley tariff of 1897. 

Hides are its raw material. Before 1897 they had always been 
free of duty, excepting the Civil War tax of 10 per cent, which 
was repealed in 1873. The effect of the duty on hides during the 
past ten years has been very injurious — injurious to the hundreds of 
thousands engaged in the industry and to the millions of consumers 
of boots and shoes. Here is a necessity of life whose manufacture 
is smitten with a blighting tax at the very point of its origin. 
The United States does not produce more than two-thirds of the 
number of hides required therein for making leather. Even with 
a 15 per cent duty, one-third of the needed supply must be imported 
from various parts of the world, principally from South America. 
The situation, therefore, is one to make such an impost upon a raw 
material like hides peculiarly disastrous to the prosperity of the 
industry, while peculiarly advantageous to the few who benefit 
from it. Where so large a proportion must be Imported, the effect 
of the duty is not only to raise the cost of the imported supplies, 
but to give an advanced and artificial price to hides produced 
within the United States. These are concentrated for the most 
part in the hands of a few owners, to whom this advantage inures. 
The farmer or cattle-grower gets little or no benefit from the arti- 
ficial price of hides, because, being a by-product and constituting 
but a small part of the value of cattle when slaughtered, the 

(295) 



34 The Annals of the American Academy 

and its further development, that there should be a general reduc- 
tion of the present very high duties on imports, supplemented by 
reciprocity treaties with foreign countries, that would enable us to 
send them larger quantities of leather and shoes, which this country 
is specially adapted to produce, in return for various commodities 
in the production of which the natural advantage is with them. 
The manufacture of leather and shoes, in which our people are 
particularly skillful, is here capable of enormous development along 
these lines. 

On the other hand, unless tariff changes be made in the direc- 
tion of liberality, there is imminent danger that we shall lose the 
valuable export trade in these articles which we already possess. 
The markets of continental Europe are gradually being closed by 
exclusive duties, and it is now highly probable that England, our 
principal foreign customer for leather and shoes, will soon shut 
her ports to us unless her present liberal policy be met with tariff 
concessions on the part of the United States. An enlightened policy, 
such as is here suggested^ it w^ould surely, seem to be part of wisdom 
for Congress to adopt, rather than one which, by heavy tariff duties, 
the avoidance of reciprocity treaties and a vicious tax upon raw 
material, tends to nullify, in part, the great advantage which the 
country possesses for the production of leather and its manufacture 
into boots and shoes. 

The great oak, hemlock and chestnut forests of the United 
States supply abundant material of the best kind for the tanning 
of leather. Improved methods, the introduction of machinery and 
the employment of chemical analysis have aided greatly in reducing 
the cost and improving the quality of the product. Our shoe manu- 
facturers are admitted to be the best in the world. Thorough 
organization, skill in making lasts adapted to all kinds of feet and 
the employment of machinery to an extraordinary degree, which 
is operated with a perfection and speed unequaled in any other 
country^ have given to the United States the first place among 
nations in the manufacture of boots and shoes. Notwithstanding 
these advantages, the combined shoe and leather industry, as a 
whole, has not had the increase and development to which it was 
naturally entitled, nor has it yielded profits commensurate with those 
of other more favored industries. The shoe and leather manu- 
facturers have never asked for protection or governmental aid. 

(298) 



Leather and the Tariff 35 

They do ask now, however, to be relieved from the burdens which 
the tariff lays upon their industry. 

Why should not the country be permitted to expand its indus- 
trial life along the line of least resistance, and why should not these 
shoe and leather industries be allowed full scope for the growth 
and development to which they are invited by natural conditions 
and the genius of our people, and thus be enabled to give profit- 
able employment to many thousands more of our citizens? 



(299) 



WHAT OUGHT THE TARIFF RATES TO BE ON PAPER 

AND PULP?^ 



By Chester W. Lyman, M. A., 
Assistant to President, International Paper Company, New York. 



The Republican platform promises revision on the basis of 
"such duties as will equal the difference between the cost of produc- 
tion at home and abroad, together with a reasonable profit to Amer- 
ican industries." The paper industry is quite satisfied with this 
principle, and it asks for itself only the same application that is 
accorded to other industries. 

Importations of paper and pulp during the past few years 
should be considered and if there were some kinds extensively im- 
ported that are, or might be, made in this country the corresponding 
duties should be increased, not for the sake of the manufacturer 
but to build up the country. Also articles made from paper should 
be so protected as to create a maximum demand for home-made 
paper. No duty should be lowered simply for the sake of increas- 
ing revenue, as the first and foremost object of the tariff is to build 
up the staple industries of the country by conserving the home 
market. Let revenue come from luxuries and from articles which 
cannot be made here. 

We ask only enough protection to enable us to meet such con- 
ditions imposed on our industry by nature or law as we cannot 
overcome by capital, energy and brains. We want merely a duty 
that will make it unremunerative for foreign manufacturers to sell 
in this country at our rock-bottom prices. We want the existing 
business and we want the increment that is bound to come with the 
further development of the country, but we are not averse to the 
duties being so low that some inconsiderable quantity of paper may 
come into this market, believing as we do that the stimulus of 
potential foreign competition is not a bad thing for the industry, 
and that high duties invite criticism and attack. 

In fact, we believe that when business is good and the demand 

1 While the f ollovnng article is an expression of the writer's individual views, he believes 
xt fairly represents the prevaiUng opinion held by paper and pulp manufacturers. 

(300) 



Tariff Rates on Paper and Pulp 2,y 

is equal to the supply, the tariff has little or no direct influence 
upon prices, and that its chief function is, during times of depression, 
to prevent outside supplies coming into a market already congested. 
Then it is that every ton of paper or pulp imported increases our 
unemployed labor and capital. There is now coming into this 
country a large quantity of Canadian pulp and paper. There are 
shipments also from Germany, Norway, and elsewhere, although 
many of our paper and pulp mills are shut down from lack of orders. 

When consumption falls off, the manufacturer must curtail 
production, which increases the cost. This increase he cannot 
overcome without reducing wages. At such a time he can ill 
afford to compete with foreigners for the scanty home demand. 
It would certainly tend to revive business to have a maximum 
tariff to apply in bad times and a minimum for good times ; to ex- 
clude importations when we can make more than we can use; to 
admit them when we cannot. 

Pulp, paper, and manufactures of paper are covered in the 
Dingley tariff by Schedule M, which is the result of gradual growth 
and is not laid out on any systematic plan. It is a question, how- 
ever, whether it is worth while to destroy the continuity of growth 
by any rearrangement on more logical lines. This is a matter that 
those charged with revision will have to consider in connection with 
the tariff as a whole. 

The duties on paper are substantially the same as they were 
both under the so-called ''Wilson revenue" act and under the avow- 
edly high-protection McKinley act, and are, on the whole, very 
much lower than the general average. The duty on ground wood 
pulp, reduced to an ad valorem basis, amounts to from 8 to 13%, 
according to market prices ; on chemical pulp, about the same ; on 
news paper it amounts to about 15% ; on book paper to from 15 to 
20%, according to grade; on writing paper it varies according to 
weight and quality from 25 to 32%. A few high grade papers 
and specialties have higher duties, but the average duty, reduced 
to an ad valorem basis, on all Imports of paper during the year 
ended June 30th, 1907, was only 27.63%, whereas for all mer- 
chandise It was over 40%. 

The total value of paper and manufactures of paper Imported 
Increased from $2,838,738 In 1898 to $10,727,885 In 1907; and of 
pulp from $601,642 to $6,348,857. It Is certain that with higher 

(301) 



38 The Annals of the American Academy 

duties much of this paper and pulp could have been displaced by- 
domestic product. This is particularly true of pulp. 

Some European countries make various grades of paper re- 
quiring great skill and experience and the application of much labor, 
the manufacture of which could doubtless be established in this 
country by means of higher duties. However, it may come about 
that these papers will be made here without additional protection 
in the natural evolution of the industry, which, like many others, 
started with the lower grades but has been working up to the higher 
grades most promisingly. 

Capital is turned over in the manufacture of paper more slowly 
than in most industries, which means that the profit on the output 
ought to be correspondingly larger to make a fair return. This 
would entitle paper to higher duties than other commodities rather 
than lower, if the attempt is to be made to protect a "reasonable 
profit." This important fact, we believe, has been entirely over- 
looked in the past. 

While the industry has grown enormously, as a whole it has 
never been extremely profitable, competition frequently having 
been so fierce as to be destructive. Even before the prevailing 
depression most branches of the business had reached an acute 
state of unprofitableness, and it is safe to say that the lowering of 
tariff rates, extending as it would the scope of competitive produc- 
tion, would prove very disastrous. 

Capital employed in the paper business has been frightened by 
the attacks which have been made upon it under the leadership of 
some of the newspaper publishers, and the Republican party, if it 
remains in power, should deal w^ith the revision of the paper sched- 
ules in a liberal and reassuring manner. The opportunities for 
further development in this country have by no means been exhaust- 
ed, but progress is certain to be retarded by hostility manifested 
in any manner, particularly through legislation. 

The proposition to reduce or repeal the duty on pulp has no 
more merit than the similar proposition in reference to paper. The 
fact is ignored that pulpwood is on the free list. We do not need 
to import both pulp and pulpwood. It is certainly better for the 
country to have the latter imported and manufactured here into pulp. 
The pulp industry is in itself an important one, the amount of pulp 
made to sell amounting in value to many millions of dollars a year. 

(302) 



Tariff Rates on Paper and Pulp 39 

Pulp is therefore far from being a raw material and it would be 
manifestly a discrimination against pulp manufacturers to deny 
them the same kind and degree of protection accorded to other in- 
dustries. Morever, pulp-making is a most important part of the 
process of paper-making where the two processes are combined in 
one plant, as in the majority of cases. It requires proportionately 
as much capital and labor as the after-process of converting the pulp 
into paper. It would be extremely illogical to cut the process of 
paper-making in two in the middle and provide less protection for 
one half than for the other. 

The Republican platform proposes minimum and maximum 
schedules, the latter being intended *'to meet discriminations by 
foreign countries against American goods entering their market.'* 
This feature of the tariff would not be available in case Canada 
should continue or extend her discrimination against this country 
in connection with the exporting of pulpwood. Therefore it would 
be safer to frame the paper and pulp schedule with the particular 
end in view of meeting Canadian efforts to transplant the industry 
from the United States to its own borders. 

We would like to see in our tariff an "anti-dumping" provision 
such as Canada has, which practically makes it impossible for 
foreign manufacturers to sell their surplus in her market at lower 
prices than those prevailing at home ; and the countervailing or 
retaliatory clause which is now a feature of our paper and pulp 
schedules, providing an increase in duties corresponding to dis- 
criminations by foreign countries in restricting pulp and pulpwood 
exportation, should certainly be modified to render impossible cer- 
tain evasions which now are practiced. 

In marked contrast with the Republican program, the Demo- 
cratic platform singles out the paper industry for attack in this 
plank : 

Existing duties have given to the manufacturers of paper a shelter behind 
which they have organized combinations to raise the price of pulp and paper, 
thus imposing a tax upon the spread of knowledge. 

We demand the immediate repeal of the tariff on wood pulp, print paper, 
lumber, timber and logs, and that these articles be placed upon the free list. 

It is well known that this plank originated with certain news- 
paper publishers who tried to get Congress last winter without in- 
vestigation to place paper and pulp on the free list. Having failed 

(303) 



40 The Annals of the American Academy 

in that attempt, and having received no encouragement from the 
Congressional Investigating Committee, they nevertheless tried to 
get an endorsement of their proposition in the Republican platform, 
but without success. They have shifted the grounds a number of 
times on which they based their plea for free paper and free pulp. 
Among the reasons they have advanced are that putting these 
articles on the free list will prevent the destruction of our forests ; 
that there is a monopoly of production in this country; that there 
are combinations in restraint of trade, resulting in extortion, and 
that the alleged high price of paper is a "tax upon intelligence." 
Their aim is to keep down the price of newsprint paper, irrespective 
of the welfare of the paper industry, or of the importance of this 
industry to the country in the development of its natural resources, 
in the employment of capital and labor, in the support of allied in- 
dustries, and in the traffic it affords to transportation companies. 

It would be impracticable to admit print paper and wood pulp 
free of duty without disturbing the whole industry. Wood pulp is 
the chief ingredient of half the paper made in this country and is 
used to some extent in almost every grade. In 1850 the value of 
the total output of paper in the United States was about $10,000,000; 
in 1905 the value of the output of the paper and pulp mills was 
$188,715,000. This rapid growth has been maintained up to the 
close of 1907. The output for that year must have reached 
$225,000,000. 

It would seem to be the utmost folly to tamper with any policy 
or conditions precedent to such results. It is no less the function 
of a protective tariff to maintain and promote the growth of in- 
dustries than it is to set them upon their feet. This industry that 
appeared full-grown in 1895 has almost doubled in size since then. 
How different would have been the result in tangible gain to the 
country if, when the Dingley tariff was framed, the argument had 
prevailed that the industry no longer needed protection and we had 
thrown our market open to the world. Mature as the industry 
then appeared, it was, in fact, infantile in size and methods compar- 
ed with its condition today. Under wise guidance the industry 
can and will maintain this rapid rate of growth and improvement 
in methods for a long period to come, if protection is not with- 
drawn. For example : In the South are abundant water-powers and 
ample supplies of suitable wood, to say nothing of the annual waste 

(304) 



Tariff Rates on Paper and Pulp 41 

of hundreds of thousands of tons of materials, such as cotton-stalks 
and seed-hulls and, in various sections of the country, flax and other 
fibrous plants. 

Besides upwards of 4,000,000 tons of annual product, the paper 
mills furnish freight in the way of raw materials, supplies, etc., 
to the common carriers of the country, roughly estimated at four 
tons for every ton of product, or 20,000,000 tons of freight annually. 
They consume annually not less than 3,000,000 tons of domestic 
coal and sustain a large number of establishments which manufac- 
ture wholly or to a large extent machinery and supplies used only 
in paper mills. They furnish employment directly to nearly 100,000 
operatives in the manufacturing plants, and to probably 50,000 in 
the woods, besides indirectly supporting the labor entering into 
the manufacture of the machinery and supplies which they purchase. 
It has been estimated that for every dollar which the consumer pays 
for paper, seventy cents goes into the common -wage-fund of the 
country. Paper manufacturers in many sections of the country 
have been the pioneers, stimulating the building of railroads to new 
points, building up thriving villages, and even cities, and utilizing 
water powers that had previously gone to waste, for which there 
might not be any other demand for years to come. In 1905, 43% 
of all the water power developed in the United States was used by 
paper and pulp mills. 

The industry furnishes one of the most valuable uses to which 
certain kinds of wood may be put. Timber that has a value on the 
stump of, say $4, by the application of American labor and the use 
of American materials is converted into a product worth from $40 
to $100, according to the kind of paper for which it is used. All 
these facts, and many more which might be adduced, serve to 
demonstrate the seriousness of taking a step that would surely check 
the growth of the industry, if not partially ruin it. 

We have as our neighbor on the north a country which has at 
least equal natural advantages for making some kinds of paper, 
where without question the industry would have reached much 
larger proportions but for the fact that our duty upon paper and 
pulp has given to the United States manufacturer a slight advantage 
in supplying our market. The result is we have not only an 
abundant supply, but the industry as well. 

Has the effect been to increase the price of paper in the United 

(305) 



42 The Annals of the American Academy 

States ? On the contrary, the price has, with sHght fluctuations, gone 
steadily downward. Better newspaper, for example, is furnished 
to-day at 2^ cents per pound than was furnished twenty-five years 
ago for from 6 to 8 cents. The cheapening of paper has in turn 
increased the demand enormously, but the increase in the capacity 
of our mills has never failed to keep pace with the requirements of 
publishers and other consumers. The normal condition, in fact, 
has been one of over-production. 

Being assured by the existence of the tariff that the natural in- 
crease in demand in this rapidly-growing country would inure 
to the benefit of domestic manufacturers, capital has been readily 
available. Only in a country where practically an unlimited de- 
mand for its product was assured could the scale of manufacture 
have reached such proportions as it has in this country. Through- 
out all the processes of manufacture of pulp and paper larger units 
prevail here than in any other country, except to the extent that 
American machines, ideas and methods have been appropriated 
elsewhere. Our pulp machines, our paper machines, and our plants 
are larger than in any country in the world. Thus to the conserva- 
tion of our market is directly traceable the cheapening of produc- 
tion, resulting in lower prices, although we pay higher wages than 
are paid in the paper mills of any other country, two or three times 
those in European countries and considerably higher than in Canada. 

If the duty is removed we must either force down wages in 
this country or transfer a large part of the industry to Canada. 
It would seem that this industry had justified its claim for future 
protection by past performance. 

It has been urged that the duty should be taken off wood-pulp 
papers in the interest of forest preservation. There is no ground 
whatever for the claim that the removal of the duty would be for 
the benefit of our forests. Many erroneous impressions prevail 
on this subject. In the first place there is no duty whatever upon 
pulpwood. As long as we can get pulpwood free of duty there is 
no substantial advantage to be gained by having free paper, or 
even free pulp. In the second place, great as is the quantity of 
wood used by our mills, it is, according to the Forestry Department 
of the United States, less than 2% of the total annual drain upon our 
forests, and, according to the best estimates available, the quantity 
of any one species used for paper Is less than the annual growth. 

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Tariif Rates on Paper and Pulp 43 

More wood is used for railroad ties than for pulp, and more for 
shingles, and vastly more for fuel. Almost every form of forest 
product, excepting pulpwood, is protected by a duty. If the forests 
are to be preserved for use, which is the doctrine of the Forestry 
Service of the Government, for what better purpose could the wood 
be used than to supply an industry which adds so great an incre- 
ment to its value before it reaches the consumer in the form of a 
most indispensable commodity? For paper there is no known 
substitute ; for many of the uses to which lumber and other forest 
products are put there are various substitutes available. Finally, 
if the duty were removed from paper and pulp, the manufacturers 
who own timber lands would be compelled to strip them, as they 
could not afford to continue their present conservative methods of 
lumbering in the face of competition with Canadian mills. 

One of the reasons given in the Democratic platform for the re- 
moval of the duty from paper and pulp is the alleged existence of 
combinations or monopolies. It is only necessary to treat this phase 
of the subject in connection w^ith newsprint, as newspaper publish- 
ers are the instigators of this charge, and they are avowedly interest- 
ed only in so far as the price of news paper might be affected. In 
the recent congressional investigation of the paper industry, the 
newspaper publishers signally failed to show any combination in 
restraint of trade, or any other combination w^hich in any way con- 
trolled the price or production of newsprint. The paper makers 
on the other hand, proved that while an advance in the price of 
news paper took place last year, other grades also advanced and 
prices went up simultaneously in the principal markets of the world. 
The advance in this country was shown to be due to natural causes, 
such as the increase in the cost of labor and pulpwood. They show- 
ed that there had been absolutely no curtailment of production, 
which has since been confirmed by Government statistics showing 
a large increase in the consumption of pulpwood In 1907 over 1906. 
They showed that a large number of newsprint mills were manu- 
facturing and selling their product entirely Independently of each 
other and that the largest producer made only 35% of the total 
output, whereas ten years previously It made 60%. 

It was developed at the Investigation also that the manu- 
facturers of newsprint paper were not making any Inordinate profit, 

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44 The Annals of the American Academy 

but, on the contrary, that most of them were securing but meagre 
returns. The Department of Justice also has failed to find any 
infraction of the anti-trust laws on the part of the newsprint paper 
manufacturers. 

This same cry of combination and extortion raised by the news- 
papers has filled the ears of the public spasmodically for many years, 
and will probably continue to be raised, regardless of facts, as long 
as there is a protective tariff and free trade papers to carp at it. 
They have groaned under the burden of the price of paper while 
it has been going down from 25 cents to 2 cents a pound, and have 
charged restriction in production while the tonnage of newsprint 
paper has gone up from a few thousand tons a year to over 1,100,000 
tons. Should there at any time be any ground for such complaints, 
assuredly the law of the land is sufficient to deal with the violators 
without recourse to so drastic a measure as removing protection 
from the whole paper industry, thus making the innocent suffer 
with the guilty. 

Finally, it is claimed that the duty on paper is a "tax on intel- 
ligence." It is doubtful if any intelligent person on mature re- 
flection would endorse this plea, even admitting for the sake of 
argument that the effect of protection is to raise the general plane 
of prices. 

According to the census of 1905 only 18% of the total income of 
newpapers and periodicals w^as paid out for paper. Twenty per 
cent, increase in the price of paper would take only 3.6% additional 
from their income. Their receipts from advertisements were 56% of 
the total. Less than 7% increase in rates therefore would compensate 
for the extra bills for paper. It is no "tax upon Intelligence" to 
increase the rate asked for advertising or decrease the space allotted, 
nor to reduce the size of newspapers by cutting out some of the 
sensational features. In most papers the size could be greatly re- 
duced without crowding out any of the really valuable material 
which may have an educational or any other laudable influence. 
There is no sound excuse for publishers printing thousands of copies 
which are not sold but go to the junk heap, merely that they may 
in their strife for circulation, lay a basis for higher advertising 
rates, nor is there any Justice in their seeking to shift the burden 
of this expense upon the paper manufacturers by demanding paper 

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Tariif Rates on Paper and Pulp 45 

so cheap that they can afford to waste a considerable percentage. 
But even if we could not have newspapers of the present size, style 
and price without driving out our paper industry ; which alternative 
would be best for the country — a larger wage-fund or smaller 
papers? As Kipling says: ''We must help the people to live before 
we help them to learn." 



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RECIPROCITY IN OUR FOREIGN TRADE RELATIONS 



By William R. Corwine^ 

Secretary American Reciprocal Tariff League, New York. 



The sentiment for reciprocity in our foreign trade relations is 
almost unanimous among agriculturists, and there is a strong 
feeling for it among manufacturers. The basis for this is the 
belief that our tariff system has resulted either in the adoption of 
tariffs by nations to which we export, which have narrowed our 
opportunities for extending the sale of our surplus manufactured 
products in those countries, or in the imposition of severe sanitary 
regulations against our cattle and provisions, that have seriously 
affected our livestock and farming interests. 

Reciprocity has been an accepted doctrine of the party in 
power, has been espoused by some of its most far-sighted states- 
men, has been declared a policy in the platforms at several national 
conventions, and would, undoubtedly, if put into practical effect, 
give an impetus to our exports beyond anything that has yet been 
experienced. Its value is conceded by those nations that have 
incorporated it in their tariff systems. 

The McKinley tariff act of 1900 included a provision for 
reciprocity, aimed principally at the republics south of us, and 
resulted in reciprocity treaties with several of them and with 
two nations in Europe. These treaties had been in operation only 
a short time when^ through the policy of the Cleveland administra- 
tion, they were rendered inoperative. In the Dingley tariff act, 
passed at a special session of Congress in 1897, the provisions for 
reciprocity were reinstated as a governmental policy on a much 
more comprehensive basis than in the McKinley act of 1900. Sec- 
tion 4 of the Dingley act provided : 

That whenever the President of the United States, by and with the 
advice and consent of the Senate, with a view to secure reciprocal trade with 
foreign countries, shall, within the period of two years from and after the 
passage of this act, enter into commercial treaty or treaties with any other 
country or countries concerning the admission into any such country or 
countries of the goods, wares, and merchandise of the United States and 

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Reciprocity in Our Foreign Trade Relations 47 

their use and disposition therein, deemed to be for the interest of the 
United States, and in such treaty or treaties, in consideration of the ad- 
vantages accruing to the United States therefrom, shall provide for the 
reduction during a specified period, not exceeding five years, of the duties 
imposed by this act, to the extent of not more than 20 per centum thereof, 
upon such goods, wares, or merchandise as may be designated therein of 
the country or countries with which such treaty or treaties shall be made 
as in this section provided for ; or shall provide for the transfer during such 
period from the dutiable list of this act to the free list thereof of such goods, 
wares, and merchandise, being the natural products of such foreign country 
or countries and not of the United States ; or shall provide for the retention 
upon the free list of this act during a specified period, not exceeding five 
years, of such goods, wares and merchandise now included in said free list 
as may be designated therein ; and when any such treaty shall have been duly 
ratified by the Senate and approved by Congress, and public proclamation 
made accordingly, . . . then and thereafter the duties which shall be 
collected by the United States upon any of the designated goods, wares, and 
merchandise from the foreign country with which such treaty has been made 
shall, during the period provided for, be the duties specified and provided for 
in such treaty, and none other. 

President McKinley lost no time in putting this provision into 
practical effect. He appointed the Hon. John A. Kasson, of Iowa, 
as special cornmissioner, with plenipotentiary powers, and the latter 
negotiated several reciprocity treaties which were deemed by him 
to be favorable to the United States, and which, in the judgment of 
President McKinley, would widely extend the market for American 
products. 

The most important of these treaties was with France. In this 
treaty France granted the United States concessions from her 
maximum to her minimum tariff for everything on her list except 
nineteen articles, while we, on the other hand, excluded 337 dutiable 
articles from the benefits of the concessions we granted to France. 
The average of the concessions which France made was about 48 per 
cent, including oils, and about 26 per cent, excluding oils. In some 
cases we granted France only 5 per cent reduction, in some 10, in 
some 15, and in a few 20 per cent, the latter being the extreme 
limit to which we could go under the Dingley act, while the aver- 
age of all the concessions to France was only 6.8 per cent. 
As this was a treaty, however, under our constitution, it required 
ratification by a two-thirds vote of the Senate before it could 
become effective, and some of our manufacturers, thinking they 

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48 The Annals of the American Academy 

would be affected by the operations of the French treaty, protested 
successfully against its ratification. None of the other treaties 
were ratified, and all that had been accomplished under the Dingley 
act in negotiating them went for naught, while the hopes of the 
reciprocity advocates were temporarily blasted. 

The limitation of time within which reciprocity treaties could 
be negotiated and ratified lapsed long ago, and there is no way of 
re-establishing these old treaties or making new ones without remov- 
ing the time limit through action by Congress. There was a provision 
in the Dingley act, however, which, skilfully adopted by the present 
administration, has enabled us to ward off commercial warfare with 
Germany, and which has been used as a basis for several commer- 
cial agreements. Section 3 of that act provides that the President 
may make commercial agreements with the nations producing and 
exporting to the United States argols, or crude tartar, or wine lees, 
crude; brandies, or other spirits manufactured or distilled from 
grain or other materials ; champagne, and all other sparkling wines ; 
still wines, and vermuth ; paintings and statuary ; reducing the duties 
thereon in exchange for concessions which such nations may grant 
to the United States. As this is a very limited list of articles with 
which to trade, naturally the concessions which other nations are 
willing to grant are also limited. Beyond the prescribed commer- 
cial agreements, there is at present no reciprocity with foreign 
nations. Section 4 of the Dingley act could be re-enacted and the 
limitations of time therein imposed could be extended, but even 
then treaties negotiated thereunder would have to go before the 
Senate, where it would be as difficult now, as it was under President 
McKinley, to obtain the two-thirds vote necessary for ratification. 

Our present tariff is rigid and is so inflexible that it seems 
useless to attempt to do anything more than has been done with it 
in the way of reciprocity. The only salvation for reciprocity, it seems 
to the writer, is, first, in a dual tariff with an authorization to the 
President to negotiate, execute, and to put into operation commer- 
cial agreements within the limitations which may be imposed upon 
him ; and, second, to eliminate treaties from the program altogether. 
Our present tariff could serve as a maximum, and a minimum tariff 
schedule could be created by Congress. If the minimum were 
based on a 20 per cent reduction from the present tariff schedule^, 
then we would still be within the reduction authorized by the Ding- 

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Reciprocity in Our Foreign Trade Relations 49 

ley act of 1897; and between the maximum and the minimum, 
there would be a margin for bargaining with foreign nations. The 
President within this range might be authorized to make commercial 
agreements in the same way in which, under section 3 of the Ding- 
ley act, he is now allowed to make agreements embodying reduc- 
tions in the limited number of articles mentioned in that section. 

The single tariff, such as this country uses, has been discarded 
by most of the leading nations which have tariffs. Various forms 
of the dual, or maximum and minimum tariff, have been adopted 
by different nations, but the result sought in all of them is wider 
markets for their domestic products through reductions granted in 
reciprocal agreements or treaties ; the difference between the higher 
and the lower tariff charges giving opportunity for mutual conces- 
sions. 

Germany, under her new tariff, has executed reciprocity trea- 
ties or agreements with nearly every other country in Europe except 
those nations with which, in her general treaties, there exists the 
most-favored-nation clause, necessitating, therefore, no special or 
definite reciprocity arrangements. The higher of Germany's dual 
tariff rates would have become effective against the United States 
and would have been prohibitive against many of our exports 
theretofore sold in that country ; but its operation was postponed 
through a limited agreement reached between the officials of the 
two nations. This agreement was ultimately made into a broader 
one for a specified period, which can and doubtless will be 
extended. The agreement, however, cannot be extended indefinitely, 
and the United States, so far as its commercial relations with 
Germany are concerned, must either make a reciprocity treaty and 
ratify it, or be prepared to enter upon a commercial w^ar. The 
United States ought to have some provision for the establishment 
of reciprocal relations with other nations, else it will remain behind 
progressive countries in which more scientific methods have been 
adopted to extend their trade, and will also be liable to reprisals on 
the part of other countries with all the disagreeable results which 
follow. 

Reciprocity advocates are experiencing a revival of hope based 
upon the declaration in the platform adopted at the Chicago con- 
vention favoring a maximum and minimum tariff. The statement 
with w^hich the tariff plank opens, in which it is set forth unequiv- 

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5o The Annals of the American Academy 

ocally that a revision of the tariff shall be undertaken by a special 
session of Congress immediately following the inauguration of the 
next President, lays a foundation for the belief that the door for 
reciprocity will be opened in the immediate and not indefinite future. 
The outlook for reciprocity seems brighter now than at any time 
since the passage of the Dingley act in 1897. The declaration above 
quoted practically admits that the tariff needs revision and that the 
present system of a single inflexible schedule is obsolete. Natu- 
rally the fight will range over the maximum. Those who are in 
favor of reciprocity believe that in many cases a decrease from 
the present tariff schedules could be made without serious harm to 
American industries, and that the lower basis could be used for 
reciprocity purposes in the adoption of commercial agreements 
which would stimulate our export trade. 



(314) 



TARIFF REVISION AND PROTECTION FOR AMERICAN 

LABOR 



By John R. Commons, A.M., 
Professor of Political Economy, University of Wisconsin, Madison, Wis. 



For nearly seventy years the effective arguments that have 
sustained the protective tariff have been the home market for 
farmers and a high standard of living for wage earners. The first 
depends on the second, for without a purchasing power of Ameri- 
can labor greater than that of foreign labor the home market is not 
much better than the foreign market. The standard of living is 
the really enduring justification of the protective tariff. The tariff 
prevents the competition of foreign low-standard labor and draws 
a charmed circle within which American labor may gradually work 
out its own higher standards. 

Now, it is an important fact that the principal leaders and 
advocates who framed the pauper labor argument two or three 
generations ago and who won its acceptance by the country, did not 
believe that the tariff alone would bring about a high standard of 
living. They looked upon the tariff merely as defensive. It needed 
to be supplemented by positive efforts, by voluntary organizations, 
by legislation, within this country. In fact, the tariff was to them 
simply the means by which these domestic efforts could be guaran- 
teed a free field for successful experiment and adoption. Matthew 
Carey, from 1820 to 1840, did more than any other American to 
establish the tariff on a protective basis in the interests of labor. 
His indefatigable investigations furnished the arguments for peti- 
tions which manufacturers sent to Congress ; for reports of Con- 
gressional committees ; for speeches of Congressmen ; and he, more 
than any one else, changed the tariff argument from protection to 
capital to protection to labor. Yet Matthew Carey, although an 
employer, was prominent in the labor agitation of the 'thirties and in 
his support of the labor organizations of that period. He aided and 
defended their strikes and brought down upon himself the blows of 
the free-trade organs, which rightly identified his protectionism with 
his trade-unionism. 

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52 The Annals of the American Academy 

Following him came Horace Greeley, who did for the people 
what Carey had done for the politicians. He converted them to 
protection by the home-market and the standard-of-living argum.ents. 
Yet there was no man of national fame in his day who did as much 
effective work for trade-unionism and even socialism as Horace 
Greeley. He presided over industrial congresses to which dele- 
gates came from the labor unions, the land reformers, from the 
Fourierite, and other socialistic societies. He opened the Tribune 
to these radicals and avowed himself for socialism at the time when 
he was also powerfully supporting protection. Indeed, he claimed 
that protection was necessary to enable socialism to work itself 
out to a successful issue free from the destructive competition of 
pauper labor. 

When we come to the period after the war. Congressman 
Kelley, of Pennsylvania, so persistent and able a champion of 
protection as to be known to the nation as ''pig-iron Kelley," often 
asserted, as I have been told by his daughter, Mrs. Florence Kelley, 
that the work of his generation must be to establish American indus- 
try, the work of the next generation would be to diffuse its benefits. 

It is this hope of Congressman Kelley which I believe points 
toward the duty of the present day in the revision of the tariff. 
The socialism of Horace Greeley has long since been proved vision- 
ary. The trade-unionism of Carey and Greeley has been proved 
ineffective in the very industries where the tariff is most protective. 
In Greeley and Kelley's time the iron and steel industry seemed to 
be firmly established on a system of joint trade agreements of 
capital and labor, but, since the Homestead strike, the once power- 
ful trade union of that industry has dwindled to a remnant. The 
hours of labor for men on shifts have been increased almost uni- 
formly to twelve per day; night work and Sunday work have been 
extended wherever possible ; twenty-four hours' consecutive work on 
alternate Sundays in order to change the night and day shifts has 
become necessary for many employees ; while speeding up to the limit 
of endurance and cutting piece rates with increase of speed have been 
reduced to a science. The glass industry, too, is marked by the 
decline of unionism in certain branches, and even with unionism 
it is notorious for the exploitation of child labor. In the textile 
industry child and woman labor, long hours and interstate compe- 
tition have defied the loudest agitation and have kept the wages 

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Tariff Revision and Protection for Labor 53 

and conditions at a point actually inferior in places to those of its 
free-trade competitor, England. In other protected industries 
unionism is making a retreating fight, and I do not see how it is 
possible in those which have reached the stage of a trust for union- 
ism to recover its ground. Labor cannot concentrate as capital does. 
It is among the industries and laborers not directly protected by the 
tariff, like the building trades, the railroads, the longshoremen of 
the lakes, that unionism has its principal strength. In all industries 
its influence is partial, and the great majority of the workers are 
outside its ranks. If their standards of living are to improve under 
the protecting shield of the tariff, the improvement must come 
through the aid of legislation. 

We need scarcely stop to maintain the futility of state legisla- 
tion in protecting labor in the tariff-protected industries. If the 
industry is competitive the more advanced states like Massachu- 
setts cannot afford to handicap too greatly their own manufacturers. 
If the industry is ''trustified," the trust can shut down its factories 
in an advanced state and throw its orders to its factories in a back- 
ward state like Pennsylvania. The tactics that defeat unionism are 
those that defeat state legislation. 

As regards federal legislation there are serious questions of 
constitutionality and interference with state prerogatives. These 
have come to the front in the discussion that followed the Beveridge 
child labor bill and in the decision of the National Child Labor 
Committee to withdraw from that line of attack. It is doubtful 
whether such legislation can be brought in under the subterfuge 
of interstate commerce, or even under the "general welfare" clause. 
But more to the point is the fact that it is not based on the real 
consideration which the federal government offers to employers 
of labor as compensation for the expense which labor legislation im- 
poses. This is the protective tariff. In this field questions of con- 
stitutionality have already been settled. Congress may impose a 
tariff for protection as well as revenue. It may select the industries 
and articles to be taxed and determine the rate of import duty. 
Congress is also supreme in the matter of internal revenue taxes. 
It may impose such taxes for regulation as well as revenue. It 
coupled the National Bank act with a prohibitive tax of 10 per cent 
on state bank notes. It has placed a heavy tax on colored oleo- 
margarine in competition with dairy butter. In the field of customs 

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54 The Annals of the American Academy 

and internal revenue taxation Congress "is supreme in its action. 
No power of supervision or control is lodged in either of the other 
departments of the government."^ With this unquestioned control 
of the taxing power, the tariff can be made to pass over a share 
of its benefits to the wage earners for whom it is intended. The 
method is merely a question of the technical drafting of the law 
and not any innovation on the principles of legislation nor infring- 
ment on constitutional boundaries. 

A feasible method has been suggested by the new Common- 
wealth of Australia in the taxation of agricultural machinery. The 
so-called "excise tariff" of 1906 was adopted on the same day as 
the "customs tariff." The customs tariff act imposes a schedule 
of duties on imported goods, and the excise law {i. e., internal rev- 
enue) imposes a schedule of one-half those rates on the same goods 
when manufactured at home. But it is provided that in certain 
cases the excise duty shall not apply. These are establishments 
where the "conditions as to the remuneration of labor" in the manu- 
facture of the home product (a) "are declared by resolution by both 
Houses of Parliament to be fair and reasonable;" {b) are in accord- 
ance with an arbitration award or {c) a trade agreement of employ- 
ers and trade union as provided in the conciliation and arbitration 
act of 1904; or {d) are declared fair and reasonable after a hearing 
by a judge of the supreme court of a state or his referee. The 
administrative details are of course unessential. The essential 
feature of the Australian arrangement is an internal revenue duty 
at a lower rate than the customs duty on the competing article, and 
the remission of that duty if the home manufacturer, on whom is 
the burden of proof, can show that his employees actually receive 
the benefits intended by the protective tariff. 

I do not overlook the fact that a policy of this kind requires 
administrative machinery and scientific investigation. But this 
should be required under any kind of tariff revision. Surely the 
tariff should not be revised or reduced except on the basis of cost 
of production in this country and foreign countries. This should 
include, first of all, the comparative cost of labor. I believe all 
tariff revisionists agree to this, in order that the tariff may be 
retained ample enough to cover the higher costs of labor in this 
country. But there is a menace imminent even in such an investiga- 

17 Wall, 433 ; 195 U. S. 57. 

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Tariff Revision and Protection for Labor 55 

tion at the present time, because it assumes that revision will be 
made on the basis of the existing long hours, low wages, and child 
and woman labor of many protected industries. The actual cost 
of labor is lower than it would be if the hours, wages, and condi- 
tions were fair and reasonable. The people of this country will 
gladly support a tariff high enough to pay, not merely the existing 
wages, but better and even ideal wages. They do not ask that the 
tariff be reduced to the present labor cost. In some cases, like pig 
iron, that cost is probably less than it is in England, but in Eng- 
land the blast furnace workers are on the eight-hour day, while here 
their day is twelve hours, seven days a week. The people willingly 
protect labor, but they would like to see the tariff actually passed 
along to the wage earner. If, therefore, a tariff commission inves- 
tigates the comparative cost of labor in this and competing countries, 
it should inquire whether the wages and hours are actually reason- 
able, and what would be the cost if they were made reasonable. It is 
on this ideal basis and not the actual basis that the tariff should 
be revised. If this is done, then the only serious difficulty of the 
plan, that of investigation, is already provided for. Such a tariff 
commission would necessarily be a permanent one, and naturally 
it would be a bureau of the Department of Commerce and Labor. 

A permanent bureau of this kind would receive general instruc- 
tions from Congress as to what, from the standpoint of a reasonable 
American standard of life, should be the condition of labor. This 
might provide for all workers at least fifty-two full days of rest 
each year. It might provide that all continuous operations should 
be divided into three shifts of eight hours instead of two shifts of 
twelve hours. It might provide the eight-hour day in non-continu- 
ous operations for women workers and possibly for men. It might 
set the minimum age of child labor at fourteen. Other pro- 
visions, such as minimum rate of pay, might be more general and 
be left to the commission under general instructions to ascertain 
what is reasonable under the conditions. If upon investigation 
and inspection the bureau or commission finds that a given manu- 
facturer is granting to his employees these reasonable conditions, a 
certificate to that effect would be the warrant of the internal reve- 
nue commissioner to remit the internal revenue tax. All the 
machinery for imposing such a discriminating tax is already in 
existence in the administration of the oleomargarine tax which 

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56 The Annals of the American Academy 

imposes a tax of ten cents per pound on artificially colored oleo- 
margarine and one-fourth of one cent per pound on uncolored 
oleomargarine. This tax and its administrative machinery have 
been sustained by the Supreme Court of the United States as being 
not in contravention of the Constitution.^ The only additional 
machinery required is that which is already widely proposed in the 
form of a permanent tariff commission. Such a commission, I 
believe, is favored by the National Association of Manufacturers, 
and their bill only needs the addition of a clause giving the com- 
mission power to issue and revoke these certificates of character, in 
order to make it an effective instrument of labor protection. This 
would of course require a force of inspectors or agents, and con- 
siderable expense, but the expense would be met by the added 
revenue. 

2McCray v. U. S., 195 U. S. 27. 



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TARIFF RELATIONS WITH CUBA— ACTUAL AND 
DESIRABLE 



By Edwin F. Atkins, 
Of E. Atkins & Co., Boston, Mass. 



Cuba's political disturbances have in the past followed economic 
conditions that have caused discontent and encouraged revolution; 
such was the case in the ten-year insurrection and again in the 
insurrection of 1895, which preceded the Spanish-American War. 

Previous to 1868 the tariff laws for Cuba were framed with 
the object of giving its trade to Spain, and for this purpose four 
different rates of duty were enforced, the first and lowest rate being 
upon Spanish merchandise in Spanish vessels, the second rate upon 
Spanish merchandise in foreign vessels^ the third rate upon for- 
eign merchandise in Spanish vessels, and the fourth rate upon 
foreign merchandise in foreign vessels. A duty was in force in 
Spain against Cuban sugar as a protection for the cane sugar pro- 
duced in its southern provinces. 

As long as the European countries were dependent upon the 
West Indies for the greater part of their sugar supply, and Cuba 
was producing with slave labor and had the buyers of Europe com- 
peting with those of the United States for her sugar, little atten- 
tion was given to the fact that all legislation at Madrid was for the 
benefit of the mother country and that nothing was being done 
with a view to holding foreign markets for the island. 

As years passed the continental countries of Europe all became 
producers of beet sugar and levied heavy duties against foreign 
imports, thus closing their markets to Cuba, and as soon as their 
production exceeded their consumption requirements, export bounties 
were paid, which enabled them to sell free-trade England at prices 
a good deal below cost of production. Cuba could then no longer 
compete there, and so became dependent upon the United States, 
where, fortunately for her, a countervailing duty, in addition to 
the regular tariff, had been enforced against those countries paying 
an export bounty. 

With the gradual abolition of slavery in Cuba, 1866- 1 880, her 

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58 The Annals of the American Academy 

cost of production had greatly increased, while, by reason of the 
growth of the beet sugar industry, values had been cut in two. 
Spain through all these changes held blindly to her course of pro- 
tecting her home trade, regardless of the interests of Cuba, and 
the inevitable result was the long and disastrous insurrection, 
1 868- 1 878, which brought financial ruin to so many of the sugar 
estates of the island. 

During this period the United States, up to 1884, was almost 
as negligent of her foreign trade interests as was Spain of the 
interests of Cuba. When the change came from wooden to iron 
ships, and from sailing to steam vessels, England was prompt, not 
only to furnish tramp steamers for the transportation of Cuba's 
sugar crop to the United States, but with English capital she built 
and operated under the Spanish flag steamers which carried both 
Spanish and English merchandise to Cuba, taking advantage of 
the first and third columns of the Spanish tariff for Cuba, from 
which American merchandise was debarred, for the United States 
contented herself by imposing an additional duty of 10 per cent 
upon Cuban and Puerto Rican merchandise in Spanish vessels. 
This provision was applied by the United States as late as 1874 
upon a cargo of molasses imported by a Spanish schooner. In 1884 
these discriminating duties were abolished by agreement with Spain. 
But we had for many years the singular spectacle of English-built 
Spanish steamers, operated largely by English capital, running from 
English and Spanish ports and supplying Cuba with the many arti- 
cles of need which should have gone from the United States, includ- 
ing flour from American wheat, which was shipped from New 
York to Santander under the British flag and thence to Havana as 
Spanish flour. These same Spanish steamers came in ballast to our 
southern ports to load cotton back to Europe. 

All this was allowed for years in the name of protection to 
American industries and American shipping, and at a time when, 
through radical changes in the commerce of the world, we were 
every year taking a larger proportion of Cuban exports and paying 
through New York, by remittance of exchange, to Spain, England, 
Germany and France, in settlement for merchandise with which 
they were supplying Cuba. 

In 1890 the McKinley tariff bill was passed and by what was 
known a§ the Aldrich amendment, power was conferred upon the 



Tariff Relations with Cuba 59 

President of the United States to negotiate treaties of reciprocity 
which would admit sugar free of duty from such countries as would 
would make concessions in their tariffs upon American merchan- 
dise. Under the power so conferred a treaty of reciprocity was 
negotiated with Spain, and afterwards similar treaties were made 
with the principal sugar-producing countries of the world, and the 
United States' tariff upon sugar was practically abolished ; so our 
exports to Cuba rapidly increased, the cost of food supplies in Cuba 
was greatly reduced, and the island entered upon a period of pros- 
perity such as it had not known for many years. This lasted 
until the year 1895, when the second insurrection occurred. 

In 1894 the change from a Republican to a Democratic admin- 
istration at Washington was followed by the passage of the Wilson 
tariff bill, which again placed a duty upon sugar, cancelled the 
reciprocity treaties and brought a return to the Spanish tariff rates 
in Cuba. Prices of sugar declined, while cost of living increased ; 
confidence was destroyed through such conditions, together with a 
threatened insurrection, and as the estates finished their crops in 
the spring of 1895, all work on the plantations ceased, and the thou- 
sands of laborers suddenly thrown out of employment and unable 
to gain a livelihood took to the woods and joined the ranks of the 
insurgents. The destruction of property, the loss to commerce, 
and the reduction of Cuba's sugar crop from 1,040,000 to 230,000 
tons, with the Spanish- American War which followed in 1898, 
are now matters of history. In 1897 the Dingley tariff bill was 
passed, by which ninety-six test sugar paid 1.68^ cents per pound, 
about double the rate under the Wilson bill. 

Following our war with Spain and the taking over of her 
colonies came a radical change in our trade relations with Cuba 
through the reciprocity treaty, which took effect December 2^, 
1903. By this treaty Cuban sugar enters the United States at 20 
per cent less duty than is charged upon other foreign sugar under 
the existing Dingley rates, or in round figures 1.35 cents per pound 
against 1.69 cents, the full rate on ninety-six test sugar, and Cuba 
concedes to the United States a reduction ranging from 20 to 40 
per cent from her regular tariff rates charged to other countries. 

When this treaty took effect the serious competition between 
European beet and Cuban sugars in the United States ceased. 
Under the Brussels agreement all government bguntieS; except those 

(323) 



6o The Annals of the American Academy 

of Russia, were abolished, and the continental countries took steps 
to restrict their production to their consumption. England could 
no longer supply her requirements below cost of production, and 
began drawing upon her own colonies and Java, and these sugars, 
paying a higher rate of duty in the United States than Cuban sugars 
paid, were diverted to England and to the eastern countries, as long 
as Cuba could supply our markets. 

The first effect of the reciprocity treaty with Cuba was, as 
expected, to give that country the greater part of the differential 
duty and largely to divert her orders for supplies from Europe 
to the United States ; but as an effect of changing the sugar tariffs 
of practically the entire commercial world, and the subsequent diver- 
sion of commerce to its more natural channels, combined with a 
poor agricultural season in Europe, crops were reduced and prices 
temporarily rose in 1905. This stimulated production in all cane- 
sugar countries, including Cuba, and large crops and lower prices 
in 1907 were the consequence. 

Cuba, after the Spanish-American War, and under the 
stimulus of the reciprocity treaty, gradually recovered from the 
effects of the insurrection, but it was not until 1904 that her sugar 
crop again equaled that of 1895, preceding the second insurrection. 

In tracing sugar legislation for the last forty years we get an 
illustration of how the tide of commerce has been changed and 
diverted from one channel to another by the raising and lowering 
of tariffs and by payments of bounties, at times bringing great tem- 
porary prosperity, and again sweeping away all barriers in seeking 
its natural outlet. 

As has been stated, the first effect of the present reciprocity 
treaty was to give the greater part of the differential, amounting to 
roundly one-third of a cent per pound, to the Cuban producers, 
but as our domestic production and the Cuban crop increased, the 
New York duty-paid price dropped, and during the period, when 
the bulk of the Cuban crop is marketed (January to June), prices 
fell so far below the parity of Europe as to transfer the benefit of the 
differential to the consumers in the United States, so that in effect, 
while the reciprocity treaty in 1907 gave the United States markets 
for raw sugar to Cuba, as against other foreign competitors, by allow- 
ing her to undersell them, the island received but little pecuniary 
benefit from the differential accorded to her, and it still had to pay 

(324) 



Tariff Relations ivith Cuba 6i 

1.35 cents per pound against the free sugar from our western beets, 
and the caned sugars of Louisiana, Puerto Rico and Hawaii, which 
sources were supplying nearly half of our annual requirements and 
forcing sales at the time of the heaviest receipts of Cuban sugars. 

While United States control has, upon the whole, greatly bene- 
fited Cuba, and both General Wood and Governor Magoon are 
entitled to every credit for their administration of affairs, this rela- 
tion has not been without its disadvantages. When the Cuban 
reciprocity treaty was under discussion at Washington every effort 
was made, by special interests, to reduce the proposed differential on 
sugar to the lowest possible figure, and fearing the competition for 
our domestic sugar through cheaper Cuban labor, our ''Contract 
Labor Law," the "Chinese Exclusion Act," and our immigration 
law were all put in force in the island by General Wood, through 
directions from Washington, and afterwards made permanent by 
the joint resolution of Congress known as the Piatt amendment. 
This action has effectually prevented Cuba from getting an adequate 
supply of labor to harvest her increasing crops, and the average 
wage of the agricultural laborer throughout the year is now quite 
as high as that paid in the United States. Figures from the pay- 
rolls of a well-known Cuban plantation show an increase in cost 
of labor between July, 1902, and July, 1906, of over 40 per cent, 
and an increase in the harvest season months of March, 1903 and 
1907, of 33 per cent. With United States control came the labor 
agitator from the north and the formation of labor unions under his 
direction. This has led to a succession of strikes from trivial cause, 
many of which have had most disastrous consequences. 

In providing by treaty for the exports of the United States, 
duties in Cuba were so adjusted as to give the trade to this country 
by differential duties ranging from 20 to 40 per cent. Under this 
provision our exports to Cuba have shown a most satisfactory 
growth, and from an insignificant amount under Spanish tariffs 
they reached the value of $51,300,000 out of a total of $104,400,000 
imports for the twelve months ending December 31, nearly 50 per 
cent of the total. That the percentage was not greater was largely 
due to the high values prevailing in the United States, owing to 
control of prices of so many commodities by combinations, and to 
higher freight rates from the United States than from Europe, due 
to similar control of steamship lines. 

(325) 



62 The Annals of the American Academy 

Cuba has unquestionably benefited through United States con- 
trol, first by securing a market for her sugars, when all others were 
closed to her^ and, secondly, by the maintenance of order through 
the presence of United States troops during all but four years of 
the time which has elapsed since our war with Spain in 1898. Mil- 
lions of foreign capital have been invested in Cuban sugar, tobacco 
and cattle industries, in the building of railroads, the establishment of 
banks, and other important enterprises. But both the consumers and 
producers in the United States have also benefited, the first through 
the lowering of the tariff rate on Cuban sugar, the second by an 
increased foreign market for their goods. 

The political overturn in Cuba in August, 1906, with the 
threatened destruction of foreign property, forced the United States 
to again intervene by authority conferred by both governments 
under the Piatt amendment to the Senate army appropriation bill 
of February 25, 1902, afterwards ratified by the Cuban Congress. 
This insurrection, which was fortunately checked before much 
destruction had been accomplished, stopped all agricultural work at 
a critical period, and destroyed confidence, so that very little plant- 
ing was done for the crop of 1908, and these conditions followed 
by a severe drought during the next summer, reduced the sugar 
crop of 1908 to 925,000 tons against 1,420,000 tons the previous 
year. 

In the early spring of the present year it was announced from 
Washington that the United States troops would be withdrawn not 
later than February i, 1909; further credit was then refused to the 
planters, imports fell off, and general stagnation followed. These 
are the conditions prevailing to-day, for there are very few people 
connected with the business of the island, even among the Cubans 
themselves, who believe the country is yet prepared for an unre- 
stricted independent government, free from United States control 
in some form. 

The subject of tariff revision will soon be under discussion at 
Washington. The treaty of reciprocity with Cuba, which went into 
effect on December 2y, 1903, was for five years from that date (to 
December 27, 1908), "and from year to year thereafter until the 
expiration of one year from the day when either contracting party 
shall give notice to terminate." 

Already a movement is suggested on the part of our beet-sugar 

(326) 



Tariff Relations with Cuba 



63 



producers to prevent any reduction in the sugar schedule and if 
possible to terminate this treaty. These interests claim that, given 
a high protection, domestic sugar should, within a few years, supply 
our consumption at a saving of some eighty million dollars, now 
sent abroad in payment for imported sugars. They ignored the fact 
that the greater part of these imports are paid for, not in cash, but in 
merchandise, the product of our factories, mines and farms, over 
fifty millions of which now goes to Cuba alone. 

Another argument against reduced duties is that the United 
States cannot spare any of its revenue from sugar ; a glance at the 
following figures will show the effect upon revenue, of the marked 
increase in domestic production: 



Consumption, Supply and Revenue from Sugar — Ten Years. 

(Sugar given in gross tons.) 



Year. 


Consumption. 


Free sugar 
supply. 


Cuban crop. 


Other 
countries, bal. 


Revenue to 
June 30. 








requirements. 


1898 


2,003,000 


556,000 


(6)230,000 


1,217,000 


(0)129,504,000 


1899 


2,078,000 


537,000 


345.000 


1,196,000 


61 ,596,000 


1900 


2,220,000 


478,000 


308,000 


1,434,000 


57,741,000 


1901 


2,372,000 


698,000 


635,000 


1,039,000 


63 040,000 


1902 


2,566,000 


876,000 


850,000 


840,000 


53.033.000 


1903 


2,550,000 


971,000 


999,000 


580,000 


63,630,000 


1904 


2,767,000 


881,000 


1,040,000 


846,000 


58,152,000 


1905 


2,632,000 


1,070,000 


1,163,000 


399,000 


51,439.000 


1906 


2,864,000 


1,177,000 


1,179,000 


508,000 


52,645,000 


1907 


2,994,000 


1,278,000 


1,428,000 


288,000 


(c)6o,334,ooo 



Notes. — Sugar statistics are for calendar years. Revenue for fiscal 
years. Figures of consumption and crops from Willett & Gray's Reports: 

(a) Revenue effected by change in tariff August, 1907. (fc) Spanish- 
American War. (c) Temporary increase from heavy Cuban importations 
previous to June 30. 

During the ten-year period above given the consumption of the 
United States increased 991,000 tons, the average annual increase 
being slightly under 5 per cent; during the same period the supply 
of free sugar increased 722,000 tons, the Cuban crop 1,198,000, 
while our requirements from all other countries have decreased 
929,000 tons, and the revenue under the Dingley tariff has (if we 
except the year 1907) not increased since 1899, but has rather 
diminished in face of the steady increase of consumption. 

Following these figures to a logical conclusion, and barring 

(327) 



64 The Annals of the American Academy 

partial crop failures, such as occurred in Cuba the present year, 
when the crop is reduced to 925,000, the present tariff rate would 
first shut out sugars from all foreign countries, other than those 
from Cuba^ then check, and afterwards reduce, the Cuban produc- 
tion, for the reason that sugar paying a duty of 1.35 cents per pound 
cannot cornpete with that paying no duty. 

The revenue from sugar under the present tariff has apparently 
reached and passed its maximum point, and any increase in tariff 
rates would soon decrease it by artificially stimulating the domestic 
production for which consumers are already paying some one hun- 
dred million dollars annually, but little more than half of which 
reaches the United States treasury. 

Under the Treaty of Paris, 1898, and the provision of the 
Piatt amendment, 1902, the United States first made themselves 
responsible for, and afterwards assumed the right to protect life 
and property in Cuba. In case of further trouble following the 
contemplated withdrawal of United States troops, either we must 
return promptly or so far abandon the Monroe Doctrine as to per- 
mit the landing of troops by the European governments for the 
protection of their citizens, whose interests there are large and 
steadily increasing. 

While the present differential duty of .34 cents per pound 
has proved sufficient to protect Cuba in the United States markets 
against the lower cost sugars of Europe and Java, she cannot long 
compete with our domestic sugars against the duty she is now pay- 
ing of 1.35 cents per pound. As long as the island is prosperous 
and under some form of United States control, a Republican gov- 
ernment may be maintained ; but should her great sugar industry 
be made unprofitable, either by cancellation of the treaty or by long 
continuance of the present high duty against her sugar, revolution, 
fed by her unemployed, is sure to result in the future, as it has 
under similar circumstances in the past. Revolution would be fol- 
lowed by a third and final occupation by the United States, by 
annexation, and finally by abolition of air duties. Whether such a 
condition is desirable in the near future, either for the United 
States or for Cuba, is open to grave doubt, but no government in 
any form, other than one of military force, can be maintained 
unless the people are given a ''square deal/' and allowed to benefit 
through their own industry. 

(328) 



Tariff Relations with Cuba 6$ 

To put the sugar industry of Cuba upon a sound basis does 
not require the removal of duties here, or such drastic measures as 
would prevent a fair and just return to our beet sugar and other 
producers upon their invested capital. But these interests are no 
longer dependent upon the present high Dingley rates — a liberal 
reduction can now be made in our sugar schedules ; and by continu- 
ing the present differential of 34 cents per one hundred pounds, our 
large and increasing export trade to the island can be held, through 
maintaining its leading industry in a sound and healthy condition. 

Will our domestic producers allow such reduction, or will they, 
by pursuing the former policy of Spain, risk all, and bring about 
the very conditions of free trade which they are so anxious to avoid ? 



(329) 



COMMERCIAL RELATIONS OF THE UNITED STATES 
WITH CANADA 



By John Ball Osborne, 
Chief, Bureau of Trade Relations, Department of State, Washington, D. C. 



Nature is a most powerful ally in the development of the 
commercial relations between the United States and the Dominion 
of Canada. That great northland, with an area exceeding that of 
this country and with a population of six million energetic, ambi- 
tious souls, has enormous natural resources and is rightly spoken 
of by its statesmen and economists as a land of "almost infinite 
possibilities." With Canada the United States has many mutual 
interests and there is a marked homogeneity in the people of the 
two countries. A glance at the map must inevitably suggest that 
political arrangements frequently fail to follow rational commercial 
lines. A straight line connecting the northern boundaries of Min- 
nesota and ]\Iaine will cut from the Dominion the richest and most 
populous portions of Ontario and Quebec, and, as a matter of fact, 
the commercial interests of the provinces along the American 
border are quite as intimately connected with those of the adjoining 
states as with each other. Thus, the maritime provinces are geo- 
graphically related to New England ; Ontario to New York^ Penn- 
sylvania, Ohio, and Michigan; Manitoba and the Northwest terri- 
tories to Minnesota, North Dakota, and ^Montana; and British 
Columbia to our Pacific Coast states. 

Lender these favoring national conditions it might be expected 
that there would be the freest commercial intercourse between the 
two countries, the principal limitation being the law of supply and 
demand as regards American imports of Canadian natural products 
and the consuming ability of the Canadian people as regards the 
diversified exports of the United States. In a measure this is true. 
The commercial movement between the two countries is indeed 
extensive, as the statistics given below show ; but it is not as inti- 
mate and important as it would be were it not for the operation of 
two great factors — colonial sentiment and tariff barriers. Senti- 
ment alone figures very little in the determination of international 

(330) 



Relations of the United States with Canada 



67 



commerce ; but in this case it was the colonial tie that inspired and 
created the preferential tariff system of Canada, and this is a factor 
that cannot be ignored. 

In recent years the Dominion of Canada has come into the 
ranks of the commercial countries of the world. Its total trade in 
1883 was $230,000,000; in 1893, it had risen to $248,000,000; in 
1903, to $467,000,000, and in 1906 it exceeded $550,000,000. 

The trade between the United States and Canada in each year 
since 1903 was as follows : 



Fiscal Year (United States). 



1903 
1904 

1905 
1906 
1907 



Imports into the United 
States from Canada. 



$54,781,418 

5i>552,79i 
62,469,632 

68,237,653 
73.334,615 



Exports to Canada from 
the United States. 



$123,266,788 

131,234,985 
140,529,581 
156,736,685 
183,206,067 



The importance of our trade with Canada is shown by the fact 
that in the fiscal year 1907 the value of the exports of American 
products to Canada was exceeded only by our exports to two 
countries, namely, the United Kingdom and Germany. Similarly in 
the same year our imports from Canada were exceeded in value by 
the imports from only five countries, namely, the United Kingdom, 
Germany, France, Cuba, and Brazil. 

As might be expected, nearly everything that Canada sends to 
this country falls within the description of raw materials for manu- 
factures or foodstuffs. The principal items making up our imports 
from Canada in 1907 were logs, lumber, and wood pulp ; copper 
and nickel ores ; hides, skins, and furs ; fish and animals ; and 
bituminous coal. These in fact, have been the classes of articles 
that have been most largely imported ever since the days of the 
reciprocity treaty. 

As regards American exports to Canada, while there are many 
heavy items coming in the category of raw materials, such as coal, 
both anthracite and bituminous ; raw cotton, cereals, leaf tobacco, 
fruits, etc., the bulk of the exportation represents manufactured 
articles, particularly iron and steel goods, agricultural implements, 
chemicals, railway material, carriages, paper, etc. 

The interchange of the same articles of merchandise has always 

(331) 



6S 



The Annals of the American Academy 



been a noteworthy phenomenon in our trade with Canada. Thus, 
one article may be exclusively an import in one state along the 
border and an export in another, or its status may be determined 
by the condition of the crops. The principal articles which figure 
both as imports and exports are the following: animals, breadstufifs, 
copper, fish, fruits, hides and skins, and vegetables. There is con- 
siderable border traffic in vegetables in both directions, particularly 
in the northeast. The identity of some of these elements in the 
trade has more than once been advanced as an argument against 
reciprocity. Thus, when the Senate was considering, in 1865, the 
termination of the Marcy-Elgin treaty. Senator Conness, of Cali- 
fornia, exclaimed: 

How you can make a treaty reciprocal between two countries lying 
contiguous to each other which have the same products, the same class of 
industries, I cannot exactly see. Subject the arrangement of that reciprocity 
to a treaty, or the mode furnished by a treaty, and you have simply an 
arrangement in which each party endeavors to cheat the other in making the 
agreement to be arrived at. 

The following table, from official Canadian statistics,^ gives 
the total exports from Canada in specified years from 1868 to 1906, 
and the shares going to the United Kingdom and the United States 
respectively : 



Years. 


Total 
eKports. 


Exports to United 

KlXGDOM. 


Exports to United 
States. 




Total value. ' Per cent. 


Total value. 


Per cent. 


1868 

1870 

1873 

1875 

1880 

1885 

1890 

1895 

1900 

1901 

1902 

1903 

1904 

1905 

1906 


$57,568,000 

73.573.000 

89,790,000 

77,887,000 

87,91 1,000 

89,238,000 

96,749,000 

113,639,000 

191,895,000 

196,488,000 

211,640,000 

225,850,000 

213,52 1,000 

203,316,000 

256,587,000 


$21,329,000 

24,951,000 

38,744,000 

40,033.000 

45,846,000 

41,878,000 

48,354,000 

61,857,000 

107,736,000 

105,329,000 

117,320,000 

131,202,000 

117,591,000 

101,959,000 

133.095.000 


37-0 
33-9 
43-6 

51.4 
52.1 
46.9 
49.9 
54.4 
56.1 
53-6 
55-4 
58.1 

55-1 
50.2 

51-9 


$27,534,000 
32,985,000 
42,073,000 
29,912,000 
33,350,000 
39,753,000 
40,523,000 
41,298,000 
68,619,000 
72,382,000 
71,198,000 
71,784,000 
72,773,000 
77,404,000 
97,807,000 


47-9 
44.8 
46.9 
38.4 
37-9 
44.5 
41 .9 

36.3 

35-7 
38.8 

33-6 
31.8 
34-1 
38.1 
38.1 



^ From Tables of the Trade and Navigation of the Dominion of Canada, 

(332) 



Relations of the United States with Canada 



69 



It appears from the foregoing table that the mother country 
is the best customer of Canada and the United States the next best, 
the percentages in 1906 being respectively fifty-two and thirty-eight. 
The table indicates, too, that not since the early seventies has the 
United States been as extensive a purchaser of Canadian goods as 
the United Kingdom. This, perhaps, will be a surprise to many 
persons who have supposed that this country constitutes Canada's 
largest market. 

It is more interesting and significant, however, to consider 
the imports for consumption into Canada for the same years as 
above given, with special reference to the United States and the 
United Kingdom. These figures are given in the following table 
from Canadian sources ;^ 



Years. 


Total imports 
for consumption. 


Imports for consumption 
FROM United Kingdom. 


Imports for consumption 
FROM United States. 


Total value. 


Per cent. 


Total value. 


Per cent. 


1868 

1870 

1873 

1875 

1880 

1885 

1890 

1895 

1897 

1900 

1901 

1902 

1903 

1904 

1905 

1906 


$71,985,000 
71,238,000 
127,515,000 
119,619,000 
71,782,000 
102,710,000 
112,766,000 
105,253,000 
111,294,000 
180,804,000 
181,238,000 
202,792,000 
233.791.000 
251,464,000 
261,926,000 
290,361,000 


$36,664,000 
38,595,000 
68,523,000 
60,347,000 
34,461,000 
41,407,000 
43.390,000 
31,132,000 
29,412,000 
44,790,000 
43,018,000 
49,206,000 
58,897,000 
61,778,000 
60,343,000 
69,195,000 


50.9 
54.2 

53-7 
50.5 
48.0 
40.3 

38.5 
29 .6 
26.1 
24.7 
23-7 
24.3 
25.2 
24.6 
23.0 
23-8 


$26,315,000 

24,728,000 

47,736,000 

50,806,000 

29,347,000 

47,151,000 

52,292,000 

54,635,000 

61 ,649,000 

109,844,000 

110,485,000 

120,815,000 

137,605,000 

150,827,000 

162,739,000 

175,862,000 


36.6 
34.7 
37-4 
42.5 
40.9 
45-9 
46.4 
51-9 
55-9 
60. 7 
60.9 
59-6 

58.9 
60. 1 
62.1 
60.6 



Here we see that the conditions are precisely reversed in com- 
parison with the statistics of exports from Canada, for the share of 
the imports from the United Kingdom has steadily declined from 
50.9 per cent of the total in 1868 to 23.8 per cent in 1906, while the 
share of the imports from the United States has increased from 
^6.6 per cent to 60.6 per cent. These results are remarkable when 
it is remembered that the relative loss of the mother country and 
corresponding gain of the United States have been apparently in 

2 From Tables of the Trade and Navigation of the Dominion of Canada. 

(333) 



70 The Annals of the American Academy 

defiance of the preferential tariff treatment enjoyed since 1897, in 
varying degrees, by numerous classes of British products at the 
expense of the like products of American origin. The inference 
drawn by many persons from this state of affairs is that the pro- 
British tariff of Canada has been ineffectual. I am not prepared 
to accept this conclusion, but am strongly of the belief that the 
preferentials in favor of the goods of the mother country have 
actually exerted, especially since 1900, an important, although inde- 
terminable, influence. In other words, I am of opinion that since 
British manufactures enjoyed a rebate of one-third the regular 
duties, the Canadian tariff has exerted a restrictive effect upon the 
normal growth of American export trade to that country, so that 
our share might have been in 1906 perhaps 75 per cent, instead 
of 61 per cent, if the trade of the United States had not suffered 
this differential treatment in competition with British industries. 

But be this as it may, the table shows that Canada makes the 
bulk of her foreign purchases in the American market, notwith- 
standing the preferentials and the colonial or imperial sentiment. 
Commenting upon this state of affairs, the editor of the London 
Financial Times recently remarked that what has evidently been 
accomplished by the preferential tariff" is a checking of the decline 
in British exports to Canada which set in between the years 1892 
and 1895, and in this respect, he thought, it has performed a service 
to British manufacturers. While this is undoubtedly true, some 
share of the credit for arresting the decline mentioned is due to 
British exporters who have awakened in recent years to the neces- 
sity of energetic efforts in order to maintain their hold on the 
Canadian market. I quote the following extract from the editorial 
referred to : 

The geographical position of Canada, it is obvious, is a severe handicap 
to British manufacturers and a corresponding advantage to United States 
merchants. There is also what, perhaps, is too often overlooked here — the 
immense advantage given to the states by the approximation of social and 
economic conditions in the two countries. To so great an extent is this the 
fact that the manufacturers of the states can regard the Dominion as being 
in many of its requirements merely an extension of the home market and 
as not needing specialized lines or methods of production such as our manu- 
facturers would in many cases have to undertake before they could hope to 
compete on equal terms. The big point in our own favor consists in the fact 
that we are Canada's principal customer, with the result that there is always 

(334) 



Relations of the United States with Canada yi 

a large tonnage moving eastward and providing comparatively low freights 
for return business. Then we have the preferential tariff and that wider 
preference in good will which arises from our political connection and our 
ties of blood. 

While the preferential tariff is a most important factor in 
building up trade between the Dominion and the United Kingdom, 
it is not difficult to account for the steady increase of imports from 
the United States. All our consular officers stationed in Canada 
agree that American goods are held in high favor as respects 
quality. In a recent report Consul Van Sant, of Kingston, says that 
in the long run, notwithstanding the keenest competition and senti- 
ment, the natural advantages in geographical position and common 
commercial interests and tastes seem to count favorably, and the im- 
portation of manufactures from the United States continues to lead. 
In order to hold this position, he cautions the American exporter 
to watch the situation and to meet every new wave of industrial 
competition by extending fair trade inducements to Canadian 
merchants who buy abroad. Consul Van Sant also makes the 
gratifying announcement that there are no complaints against 
American packing methods in his district, and that the usually 
admitted superiority of American goods and their quick transit 
across the border, along with the low average of breakage and 
damage, have aided largely in bringing about the leading trade posi- 
tion enjoyed by the United States. It would seem that these con- 
siderations explain the apparent failure of the preferential tariff to 
accomplish what its framers claimed for it. 

In several important lines of manufactured goods the United 
States enjoys in the Canadian market an apparently securely 
entrenched position notwithstanding differential tariff treatment 
in competition with the industries of the mother country. It may 
be of interest to note a few of these industries in which the United 
States is strongest and the United Kingdom weakest. Such are 
agricultural implements and machines, tools and hand or machine 
implements, portable machines and parts, locomotives, railway cars, 
copper manufactures, electrical apparatus, and iron and steel manu- 
factures. In some of these classes of Canadian imports the share 
of the United States is as high as 90 or 95 per cent, thus giving a 
virtual monopoly. This position is likely to be maintained indefi- 
nitely, excepting in so far as modified by the growth of domestic 

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*j2 The Annals of the American Academy 

manufactures, including the Canadianized American plants, to which 
I shall presently refer. 

On the other hand, the classes of manufactures in which our 
British rivals have been aided materially by the preferentials include 
the miscellaneous metal trades, hardware, cutlery, jewelry, etc. ; tex- 
tiles ; waterproof clothing ; leather goods ; steam engines and boilers ; 
some kinds of iron and steel, particularly pig iron ; and earthenware. 
In all these lines the gain of Great Britain seems to have been at 
the expense of the United States. Still other British industries that 
have been benefited by the preference are hats, caps, and bonnets ; 
drugs, dyes, and chemicals ; china and porcelain ; and cement, 
although in these classes the trade of the United States has kept 
pace with the increase in the Canadian demand and has generally 
increased more rapidly. At any rate, the classes of manufactured 
goods that I have enumerated in this paragraph are those in respect 
of which we have good cause to apprehend increasingly keen com- 
petition from the mother country as a direct result of the heavy 
tariff preference. 

The following interesting tables, showing the general course 
of Canadian trade from 1884 to 1905, were compiled by the Canadian 
Tariff Commission in 1907. While some of the percentages are 
slightly different from those I have given above, the discrepancies 
are due simply to taking total imports in one case and total imports 
of merchandise for consumption in the other ; 

TABLE A. — Imports into Canada: Percentage Derived from Different 

Sources. 

Origin. 1884. 1894. 1904. 1905. 

United Kingdom 40.1 34-2 24.6 23.6 

The rest of the empire 3.1 2.5 4.4 5.1 

Total imports from British Empire... 43.2 36.7 29.0 28.7 



United States 46.7 46-9 60.0 60.7 

Other foreign countries lo.i 16.4 ii.o 10.6 

Total from foreign countries . 56.8 63.3 71.0 71.3 



According to the above table the imports into Canada from the 
mother country fell from 40.1 per cent in 1884 to 23.6 per cent in 

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Relations of the United States with Canada 73 

1905, while those from the United States rose from 46.7 per cent 
to 60.7 per cent in the same period. 

TABLE B. — Exports from Canada: Percentage to Various Destinations. 

Destination. 1884. 1894. 1904. 1905. 

United Kingdom 46.9 58.5 554 50.6 

The rest of the empire 48 5.0 5.7 5.9 

Total exports to British Empire 517 63.5 61. i 56.5 

United States 43.0 31-6 337 37-4 

Other foreign countries 5.3 4.9 5.2 6.1 

Total to foreign countries 48.3 36.5 38.9 43.5 

It appears from the foregoing table that the exports from 
Canada to the mother country rose from 46.9 per cent in 1884 to 
50.6 per cent in 1905, while, in the same period, those to the United 
States declined from 43 per cent to 37.4 per cent. It should be 
borne in mind, of course, that this is simply a statement of respective 
shares expressed in percentages, for Canadian exports to the United 
States have, as we have seen, increased to a formidable figure. 
What the table does show, however, is that the mother country was 
buying more, relatively, and the United States less, relatively, in 
1905 than in 1884 in the Canadian market. On the principle of 
natural reciprocity in trade — that a nation should buy where it 
would sell — the percentages of the Tariff Commission seem to me 
to point a certain moral and to be pregnant with meaning, the trend 
of the second table (B) foreshadowing a different story for the first 
table (A), when they shall be recast a few years hence. 

The statistics that I have presented show, I think conclusively, 
that the pro-British tariff has failed to accomplish the divergence in 
international trade which its founders and advocates anticipated; 
but it would be unwise to minimize its importance, for the time may 
come when tariff differentials against American goods of 33V3 
per cent, or even 25 per cent, will suffice to ruin our export trade 
to the Dominion. There is no partisanship in the proposition that 
the continuance of our industrial prosperity is essential to the con- 
tinuance and progress of our foreign trade. If the present halcyon 
period were to be succeeded by one of depression and stagnation, 

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74 The Annals of the American Academy 

all experience indicates that foreign tariff restrictions against Ameri- 
can products that are now, on the impulse of the waves of prosperity, 
overridden without much difficulty, would become stone-wall obsta- 
cles. It therefore should be a matter of general concern to under- 
stand precisely the character of the Canadian tariff system. 

Prior to 1897 Canada, like the majority of countries and colo- 
nies, employed the single tariff system. In that year the ParHament 
of the Dominion adopted a double tariff, consisting of the regular 
tariff and the preferential tariff in favor of the mother country 
and reciprocating colonies. During the first year the reduction 
allowed as preference was only 12^ per cent; but by the terms of 
the original law (May 13, 1897) this was increased in 1898 to 25 
per cent. It remained at that figure until July i, 1900, when, by 
an order previously made in council, it was increased to 33^/3 per 
cent, and this continued to be the uniform reduction in duties on 
imports from the United Kingdom and reciprocating colonies 
(mostly in the West Indies) until the triple tariff of 1907 went into 
effect. While the Canadian tariff during the period 1897 to 1907 
was virtually a double tariff, like the maximum and minimum tariff 
of France, it was a single tariff in form, with a single schedule of 
duties applicable to all foreign countries alike, the provision for 
preferential treatment within the British Empire being a separate 
feature of the law. 

The apparent ineffectiveness of the British preferentials was 
the principal reason for the revision of the tariff in 1907 on an 
entirely new plan, which bids fair to have far-reaching results. In 
preparation for the revision a tariff commission collected a mass 
of evidence in 1906 in the different industrial centers, both in the 
Dominion and in England, as regards the effect of the then existing 
uniform preference of 33V3 per cent and the needs and wishes of 
the business interests concerned. As adopted by the Canadian Par- 
liament, the new tariff consists of three schedules of duties on the 
same articles published in parallel columns, thus making the system 
a unique triple tariff. These columns are headed respectively ''Brit- 
ish Preferential Tariff," ''Intermediate Tariff," and "General Tariff." 

The rates of the "General Tariff," applicable to the United 
States, are not radically different from those of the old tariff. The 
average ad valorem rate of duty collected In 1906 on total dutiable 
imports from the United States was 24.8 per cent, and on total 

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Relations of the United States with Canada 75 

free and dutiable imports 13. i per cent, thus showing a moderate 
tariff of the protective class. 

Considerable change was made in the British preferential tariff. 
Instead of the former flat rebate of 33^/3 per cent, fixed duties, 
mostly specific, were provided, some representing a higher prefer- 
ence than one-third and others a less. The preference was increased, 
speaking generally, on iron and steel and their manufactures, glass 
and glassware, earthenware and china, silk manufactures, and paper 
manufactures. It was made lower on cotton manufactures, woolen 
goods; flax, hemp, and jute manufactures; drugs, dyes, and chemi- 
cals, and leather and its manufactures. It was estimated by the 
tariff commission that of the total dutiable imports (measured by 
valuation) from the mother country the preference was increased 
on 28 per cent and diminished on ^2 per cent. It is also to be 
remembered that the preference will be materially diminished to the 
extent that the intermediate tariff shall be put into effect. It will 
presently be affected by the new Franco-Canadian reciprocity treaty. 

The most interesting feature of the new law to the United 
States, however, is the intermediate tariff, standing in a column 
between the British preferentials and the general tariff, with rates 
for the most part from 2^ to 5 per cent lower than the general rates. 
This tariff is to be brought into operation by Canadian order in 
council after negotiation with foreign countries which ''give Canada 
favorable conditions," or with British colonies other than the recip- 
rocating colonies which enjoy the preferentials. 

Mr. Fielding, in outlining the intermediate tariff, made the fol- 
lowing significant statement in Parliament: 

All we do then by adopting this intermediate tariff is to hold it up to 
countries abroad and say: This is something which you may obtain if you 
desire by entering into negotiations with Canada ; you may obtain the whole 
tariff for equal compensation or you may obtain a part of that tariff for 
compensation. You may obtain it from day to day by reciprocal legislation, 
or you may obtain it by a treaty brought about through the diplomatic chan- 
nels. We do not therefore bring this middle tariff into operation at once, but 
we put it before the world as a statement of the terms and conditions upon 
which we are willing to negotiate with other countries, and in order that we 
may induce them to give us better terms and take from us a larger share of 
the products of Canada. 

It has been the general impression that the intermediate tariff 
is an invitation extended mainly to the United States. France, how- 

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^6 The Annals of the American Academy 

ever, has been the first country to profit by it. A reciprocity conven- 
tion between Canada and France was signed at Paris on September 
19, 1907, whereby Canada granted to France the benefits of the inter- 
mediate tariff on a long Hst of French products, including practi- 
cally everything in which that country is interested, and in return, 
France conceded to Canada her minimum tariff duties on a large 
number of Canadian products. This treaty has been approved by 
the Canadian Parliament and is now awaiting ratification by the 
French Senate, having been already approved by the French Cham- 
ber of Deputies. When it goes into effect in Canada it is obvious 
that it will have a double influence, namely, it will impair pro tanto 
the value of the British preference on competitive goods and it will 
increase the differentiation against the United States until the latter 
shall obtain the same treatment. 

Inasmuch as the United States cannot hope to obtain the benefit 
of the preferential tariff, which, of course, is restricted to the 
mother country and reciprocating colonies, all our interest centers in 
the possibilities of the intermediate tariff. By the provisions of the 
reciprocity convention above mentioned, France secures the rates of 
the intermediate tariff on no less than ninety-seven articles or classes 
of articles, almost exclusively manufactured goods. Here are some 
of them : canned meats ; florist stock and trees ; canned corn ; canned 
fruit ; all kinds of nuts ; canned fish ; confectionery ; photographs, 
paintings and drawings ; toilet preparations ; printing and writing 
ink; tableware of china, porcelain, white granite or ironstone; 
cement ; window glass ; glassware in general ; manufactures of lead, 
copper, brass, aluminum, gold, and silver, not otherwise provided 
for ; clocks and watches and their movements ; locomotives and motor 
cars ; automobiles and motor vehicles ; manufactures of iron, steel, 
or wood, n. o. p. ; house and oflice furniture ; dress goods, cotton 
threads ; carpets and rugs of cocoa, straw, hemp, or jute ; braids, 
fringes ; handkerchiefs and corsets ; velveteens and plush fabrics ; 
musical instruments and talking machines ; leathers ; boots and shoes ; 
trunks and valises ; toys ; gloves and brushes. 

The treaty also contains a schedule of twelve classes of French 
goods enjoying the benefit of special duties. These include wines, 
books, drugs and medicmes, laces and embroideries, silks, ribbons, 
and velvets. 

But there are many other articles in the intermediate tariff not 

(340) 



Relations of the United States zvith Canada yy 

provided for in the French treaty and yet possessing no little 
importance to our own trade, for the tariff consists of 711 numbers, 
including goods that are free in all three columns. For example, 
the item of typewriters does not occur in the French treaty, and 
yet the United States is interested therein. The duties are : prefer- 
ential, 17^ per cent ad valorem ; intermediate, 22^ per cent, and 
general, 25 per cent. It is the same with cornmeal ; printing 
presses ; agricultural machinery ; stoves ; wagons and carriages ; 
bicycles and tricycles ; and many other products of American inge- 
nuity and skill. France has not obtained the reduced duties upon 
them because she is not concerned in their exportation to Canada ; 
but the case is different when the trade relations between the United 
States and Canada are considered. 

In this connection we are hardly concerned, except incidentally, 
with the equally serious question to the United States presented by 
the increased differentiation against American exports in the French 
market as a result of the Franco-Canadian treaty. Speaking of the 
concession by France to Canada of the minimum duties on agri- 
cultural machinery, Consul General Mason, of Paris, says in a 
recent report: 

The difference between maximum and minimum French duties on agri- 
cultural machinery figures out, as has been stated in a previous report, to 
$3.86 on a mower, $4.82 on a reaper, $8.20 on a binder, and $1.93 on a hay- 
rake. This disparity of import duties is sufficient, in addition to the high cost 
of steel, wood, and labor in the United States, to put the importers in France 
of American harvesting machinery at a disadvantage that will imperil their 
present splendid trade as soon as Germany, Great Britain, and henceforth 
Canada, can develop their production so as to cover the French market. 
Already the Canadian manufacturers are preparing to improve the larger 
opportunity that will be offered here, and it is reported that a harvesting 
machinery plant in Canada, which belongs to the American syndicate, will 
be enlarged and worked to its highest capacity for the export trade to France. 
The pending situation, if indefinitely prolonged, may result in transferring 
largely to Canadian territory this and several other industries which have 
been built up and have their native home in the United States. 

To this testimony it is pertinent to add that of Consul General 
Bradley, of Montreal, who reports that a special commissioner, sent 
over by the British Board of Trade to find means of extending the 
trade with England, states that 122 of the leading manufacturing 
firms of the United States have operating branches in Canada, and 
declares that in Montreal alone $25,000,000 to $75,000,000 American 

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^8 The Annals of the American Academy 

capital is invested. The complicating effect upon our trade rela- 
tions of an "American invasion" of this kind needs no comment. 

When discussing the question of our commercial relations with 
Canada, one instinctively thinks of reciprocal tariff arrangements. 
In carrying out the policy of commercial reciprocity the object of 
the United States has always been to protect its export interests in 
foreign markets^ granting no more in return for the concessions thus 
secured than is consistent with the principle of adequate protection 
of domestic industries. No more appropriate field for the inaugura- 
tion of this policy could be suggested than the Dominion of Canada, 
for reasons which I mentioned at the beginning of this article. 
These considerations, indeed, actuated the two governments in con- 
cluding the Marcy-Elgin treaty of 1854, which went into effect 
in 1855 and remained operative until March 17, 1866, when it was 
terminated in consequence of notice on the part of the United 
States in accordance with congressional direction. That treaty 
established a certain measure of free trade between the contracting 
parties, inasmuch as it exempted from duties some twenty-eight 
classes of natural products when imported into either country from 
the other. The action of Congress in directing the termination of 
the treaty was quite generally approved by the people of the United 
States, although the mercantile interests engaged in the Canadian 
trade were, as a rule, in favor of its extension or at least renewal 
in revised form. 

Repeated efforts to secure another reciprocity arrangement for 
the regulation of our commercial relations with Canada have been 
made, without result, since 1866, notably in 1869, 1874, 1892, and 
1898-99. The overtures came, I believe in each instance, from 
Canada. The Joint High Commission of 1898-99 had made sub- 
stantial progress toward an agreement on the subject of com- 
mercial reciprocity, which was only one of a dozen topics under 
consideration, when the sessions came to an abrupt termination as 
the result of a disagreement respecting the settlement of the Alaskan 
boundary dispute. There is every reason to believe that a satisfac- 
tory treaty of reciprocity could have been arranged had the Canadian 
commissioners been willing to conclude independently of the Alas- 
kan boundary. The responsibility, therefore, for the absence of a 
reciprocity arrangement between the two countries does not, in my 
opinion, rest with the United States. 

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NOTES ON OUR TARIFF RELATIONS WITH MEXICO 



By Hon. Francis B. Loomis, 
Formerly Assistant Secretary of State, Washington, D. C. 

It may not be wholly unprofitable from the viewpoint of the 
practical legislator or of the practical man of affairs to attempt to 
consider in a special or individual way our tariff relations with 
Mexico at the present moment. It may also properly be observed in 
this connection that until we set our own house in order and are able 
to secure an adequate revision of our own tariff laws we cannot, 
under existing conditions of uncertainty with respect to such pro- 
posed modifications of our revenue system, do more than suggest 
for discussion certain articles which may be considered as a basis 
for some sort of reciprocal tariff arrangement between the govern- 
ment of the United States and that of Mexico. 

Owing to the proximity of Mexico and to the very considerable 
commercial transactions between the two countries, and owing to 
the large number of embarrassing and irritating questions that arise 
by reason of our large and frequent intercourse with our neighbor, 
it may be suggested that it would be the part of wisdom for the 
administration at Washington to make persistent effort first with 
our own Congress, then with the Mexican government for the pur- 
pose of ultimately bringing about an agreement looking to the 
establishment of a rate of duty on articles imported from Europe 
which shall not greatly vary in the two countries either as to the 
amount to be collected on a given article or as to the manner of col- 
lection. 

If something in the nature of a uniform rate of duty on articles 
of similar character and value imported from Europe could be 
agreed upon by Canada, the United States and Mexico, a great 
forward step in the solution of our tariff problem and difficulties 
would have been taken and we would be in a position to assert with 
confidence that we had advanced prodigiously toward the establish- 
ment of reciprocal tariff relations with our two neighbors, which 
relations might easily come to be a prelude to an agreement on the 
part of the three governments, of the United States, Canada and 

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8o The Annals of the American Academy 

Mexico, for the adoption of a system of what would virtually be 
continental free trade in North America. This is, of course, a 
dream of the future, but it is a dream that is not impossible of 
realization and is, therefore, a fit subject for discussion. 

There are a number of articles which, it occurs to one, could 
well be made a subject of a mutually advantageous reciprocal agree- 
ment with Mexico, if we had ample legal authority to enable the 
President to negotiate such an instrument. If the executive had a 
free hand and was not limited for "trading purposes" to a few arti- 
cles specified in the Dingley law, much solid good could be accom- 
plished, by w^ay of increasing our opportunities for foreign trade 
and improving our tariff relations with foreign countries. 

In the first place we might, with profit both to Mexico and to 
the United States, come to a satisfactory understanding respecting 
the rate of duty to be levied on laces, jewelry and diamonds imported 
into the respective countries. In this country the duty is high on 
these articles ; in Mexico it is so low as to furnish a perpetual incen- 
tive to organized smuggling operations at many points on our fron- 
tier. We are compelled to employ a large number of revenue officials 
and special agents in our attempt to suppress this illegal traffic ; and 
our efforts are by no means always successful. This is a condition 
which ought not to exist. Mexico needs income from customs duties 
for revenue purposes just as we do. It is not in the case of the 
jewelry, laces and diamonds a question of the protection of home 
industries, but rather of collecting some of the revenue necessary 
to the support of the government by a tax on luxuries which are not 
at all essential to the comfort and well being of the greater mass of 
people. There seems to be no sound or sufficient reason why the 
two countries could not collect substantially the same duties on 
articles of luxury imported from Europe. I cite this case merely 
to illustrate the achievement along this line of work which would 
be possible if Congress would authorize proper legislation. 

There are several articles manufactured in the United States 
on which Mexico levies high duties which might very well be 
admitted free, or almost free, of duty, and the admission of which in 
this way would work no ill to any real industry in Mexico. Mexico 
might enter into negotiations concerning such articles which would 
result not in any loss to her revenues, but which, on the other hand, 
might bring to her some concessions of value from us. The paper 

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Our Tariff Relations with Mexico 8i 

industry is a case in point. Mexico manufactures an insignificant 
quantity of paper. The protective tariff on papers and articles made 
from paper is so high as to exclude many of our products in which 
paper in various forms largely enters. This paper schedule ought 
to be made the subject of serious discussion between the representa- 
tives of the two countries, and extensive modifications ought to be 
worked out which would be of advantage to manufacturers in the 
United States and to the consumer in Mexico and to the receipts of 
that country from customs revenues. 

The fuel supply of Mexico is a matter of great concern, yet the 
Mexican tariff on coal and some other fuels is so high that certain 
of our fuel products are excluded, notwithstanding the fact that 
Mexican oil is consumed locally only in very limited measure. 

One of the chief and distinctive of our industries is the making 
of furniture. Mexico imposes, what seems to many of our manufac- 
turers, excessively high duty on American furniture. The conse- 
quence is that the American styles of furniture are imitated, and 
very inferior articles, I am told, are put on the market and sold 
under the guise of furniture of American manufacture. There seems 
to be no valid reason, except that our tariff law does not permit it, 
why the market for American furniture of a better class could not 
be very greatly augmented by means of a proper tariff bargain 
between the two countries. 

I think it may be stated almost in an authoritative way that the 
Mexican Government would be glad to make fair and even liberal 
concessions on certain of the articles the export of which to our 
neighbor we wish to increase, in return for a modification of our 
tariff rates on lumber and cattle. 

Mexico has a large quantity of lumber which it is desired to 
send into this country. If there be one widely used necessity which 
the people of this country are paying a very high price for it is 
lumber. If Mexico could send her lumber in at a nominal rate of 
duty the whole population of the United States would be benefited 
save perhaps the few people who are owners of large forests. I 
suppose no one will have the courage to suggest that lumber is an 
infant industry which needs fostering. Mexico offers us lumber and 
wants it to enter this country free if possible. In return for this 
suggested concession we may be sure Mexico will give us liberal 
treatment. 

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^2 The Annals of the American Academy 

The Mexicans are also interested in cattle raising and selling. 
They would like to send cattle into this country free of duty. At 
present Mexican cattle pay a duty of about $3.75 per head — if this 
duty could be remitted or abolished the consumer in the United 
States ought to reap some of the benefit, and as the price of beef 
seems to be climbing upward rather steadily even this small measure 
of relief would be welcome to the millions who have butchers' bills 
to pay. 

I make mention of cattle and lumber because of what I know 
personally of the wishes of the Mexican Government in respect to 
them leads me to believe that a highly satisfactory reciprocity treaty 
could be negotiated w4th Mexico with very slight difficulty, if the 
tariff law were a favorable one for this purpose. 

The following memorandum on the subject of "Tariff on Amer- 
ican Pianos in Mexico" has been received from one of the important 
manufacturers in this country: 

"Acting under instructions, received from the president of this 
company, we beg to state, the tariff on pianos of all kinds into 
Mexico being 55 cents per kilo, the importer pays on American 
pianos a duty ranging from $59 to $122, United States currency, 
according to weight, American upright pianos weighing from 215 to 
375 kilos net and American grand pianos from 280 to 444 kilos net. 

"Mexican importers complain that they are obliged to pay 
greater duty on American pianos on account of their greater weight. 
The lower grade of pianos of the European manufacturers especi- 
ally are of very light construction, and are so constructed to get the 
benefit of lower freight rates and lower import duty. 

"While we are in a position to compete with European makers 
as far as quality and price is concerned, we cannot reduce the weight 
of our pianos without possible injury to quality and construction, 
or not to an extent to equalize, and therefore would welcome a reduc- 
tion in tariff which would offset the advantage which European 
makers now have." 

I am informed by Mr. Gottschalk, one of our highly efficient 
consular officers, who has recently been stationed in Mexico, that 
it is quite probable that concessions could be obtained from the 
Mexican government if we were authorized to negotiate for them, 
which would result in making a valuable market in that country 

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Our Tariff Relations mith Mexico 83 

for American irrigation, mining and agricultural machines. Mexico 
has real need of these articles in carrying out her scheme of material 
development, just as she will feel increasing need for materials used 
in the construction of buildings, docks; railways, reservoirs and 
other public works. The market for automobiles of American manu- 
facture might easily be made more valuable in Mexico if the subject 
were to be considered by the two governments with a view of 
making it part of a reciprocity arrangement. There are a number 
of other articles produced in this country which I could mention 
and which might properly be included to our advantage and that 
of Mexico in a reciprocity treaty between the two countries. But 
I have set forth, I think, a sufficient number of cases to prove that 
our export trade with Mexico can be very substantially and steadily 
improved and our national wealth materially increased if Congress 
would authorize negotiations of proper reciprocity arrangements or 
give to us a maximum and minimum tariff system which shall pro- 
vide in a w^ay the basis for legitimate trading in tariff concessions 
between the United States and all foreign governments. 



(347) 



WASTE IN EXTERNAL TRADE IN GENERAL AND WITH 
THE ORIENT IN PARTICULAR 



By John P. Young^ 

Editor, San Francisco "Chronicle ;" author of "Protection and Progress," etc. 



Something over a half a century ago a noted English economist 
called attention to the possibility of a relatively early exhaustion of 
the world's supply of coal. His warning, however, was treated with 
neglect when it was not pooh-poohed by half-baked geologists, who 
endeavored to demonstrate that the measures of mineral fuel were 
practically inexhaustible. It is not extraordinary that the sugges- 
tion should have been coldly received, for at the time he wrote the 
minds of men had been turned topsy turvy by the preposterous and 
since discredited doctrines of the Manchester school, which elevated 
trade above production and assumed that the wasteful process of 
unnecessarily moving things to and fro would benefit mankind. 

Ten years ago the writer attempted to revive or create an 
interest in'the neglected subject of conservation by taking the ground 
that the chief benefit conferred by a resort to a protective tariff was 
not that upon which most stress was laid, but rather its tendency to 
conserve resources which when once dissipated cannot be replaced, 
and for which no substitutes can be found that we may hope will 
even remotely approach the cheapness of those we are now deliber- 
ately wasting. 

The concluding sentences of an extended discussion of the sub- 
ject epitomized the view of the writer which the passage of time 
is constantly strengthening. They ran: "Cobdenism has this 
inherit defect, that it considers the exchange of commodities as more 
important than their production. The aim of protection is to pro- 
mote production and to avoid waste, therefore it is the economic 
policy that must endure." 

I see no reason for modifying the opinion elaborated through- 
out the discussion, that external trade is a source of tremendous 
waste, and that many illusions we have respecting the benefits of 
transportation will have to be dismissed if we desire to promote a 
rational economy which will tend to conserve the world's resources. 

(348) 



Waste in External Trade 85 

If general neglect had caused me to question the soundness of 
the views expressed in several chapters devoted to illustrating 
waste in transportation, recent events would have confirmed them. 
Almost imperceptibly there has grown up within the past few years 
a body of opinion which amply supports the theory advanced that 
unnecessary external trade is uneconomic. 

When President Roosevelt called the governors of the various 
states of the Union to confer with him and other thoughtful men 
concerning the desirability of adopting measures to conserve the 
natural resources, the wisdom of such a course was promptly 
acknowledged. It is doubtful, however, whether some of those 
who have been most strenuous in demanding conservation have 
given much thought to the accomplishment of that result. 

The arbitrary setting aside of large tracts of land now covered 
with timber is a step in the right direction, and the tentative efforts 
of the government to retain such mineral fuel deposits as have not 
been appropriated by private individuals is another. But they are 
very short steps and do not go to the root of the problem, whose 
proper solution does not demand the prevention of use, but impera- 
tively calls for the elimination of wastefulness. 

It must be obvious to the dullest understanding that no real 
remedy is effected by arbitrarily depriving the present generation 
of adequate supplies of timber or mineral fuel. There is no good 
reason why we of the twentieth century should deny ourselves so 
that those of the twenty-first may have plenty. In the case of our 
forests it may be necessary in order to insure the continued fertility 
of the land to see that it is not denuded of vegetation, but it is pre- 
posterous to claim that our obligation to posterity demands that we 
should place obstacles in the way of the utilization of ripe timber. 
It would be equally absurd to lock up and prevent the appropriation 
for present uses of iron ores, coal and fuel oil. 

But while we may not morally nor economically be obligated to 
practice self-denial in the use of natural resources when their utiliza- 
tion is in response to real needs of the present, there is absolutely 
no excuse for wasting them, and sound public policy demands that 
the industrial system of a country, and, so far as may be practicable, 
that of the whole world, shall be so shaped that waste will be reduced 
to a minimum. 

Especially is this demanded in dealing with our deposits of iron 

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86 The Annals of the American Academy 

and mineral fuel, which may be regarded as practically irreplaceable. 
It is conceivable that energetic measures might restore the fertility 
of a country by reforesting, but no one has suggested that the iron 
ore, the coal and the petroleum once removed from the bowels 
of the earth and consumed by man can be replaced. 

Visionaries see in the utilization of the world's water courses 
a source of energy which may prove a substitute for that generated 
by coal and oil fuel, but it is ominous that concurrent with the devel- 
opment of electric energy the consumption of coal and oil proceeds 
at an accelerated pace. Thus far the use of electricity has made no 
impression upon the demand for mineral fuels, whose output 
increases at an enormous rate and out of all proportion to the 
growth of population. 

We must dismiss as unworthy of consideration the specula- 
tions of those who believe and predict that when our supplies of 
iron and mineral fuel are exhausted substitutes will be discovered 
for them. As a practical people we must deal with the problem as 
it presents itself at present, and not put trust in the vagaries of those 
who assume that the future will take care of itself. 

As a matter of fact, the problem is essentially one of the pres- 
ent. It is not a question of how posterity will be affected by the 
wasting of the earth's natural resources ; it is an impending question, 
as is evidenced by the fact that despite the tremendously increased 
output of coal and iron they are becoming dearer and must continue 
to do so until practical methods of abating the demand for them 
can be found. 

Some of those in attendance at the White House conference, 
notably Andrew Carnegie, evidently perceived that this is the case. 
Mr. Carnegie instanced the substitution of cement for steel in the 
construction of bridges ; but thus far diligent study of the papers read 
or printed fails to disclose any suggestion that we may be artificially 
creating uses for iron and fuel which a resort to rational ideas and 
practices would render unnecessary. 

There is little room for doubt that the modern theory that 
indiscriminate trading is a benefit to mankind is responsible for a 
tremendous amount of wastefulness. It has created the condition of 
mind which we are now laboriously striving to supplant. It has 
caused "economists" to regard as praiseworthy the rapid dissipation 
of natural resources. There is scarcely a writer of note who, in the 

X350) 



Waste in External Trade 87 

discussion of economic resources, does not assume that large outputs 
of irreplaceable resources are beneficial, without once asking whether 
they fill a real need or whether their temporary present abundance 
may not cause a dearth in the near future. 

Take Great Britain as an example. The economic history of 
that country is the story of an eager effort to exhaust its irreplace- 
able deposits of iron and coal. For nearly a century it has been 
vigorously exploiting its coal and iron mines and exchanging their 
products for articles of luxury and foodstuffs. Professional 
economists have applauded her course, first finding in the rapid 
growth of population proof of the soundness of the forcing out 
policy and afterward, when the pressure for subsistence became a 
problem, justifying its continuance on the ground of necessity. 

During all this period the British have been continuously export- 
ing coal and iron to countries infinitely better provided with resources 
of that character than Great Britain. In 1907 the exports of coal, 
coke and manufactured fuel from the United Kingdom amounted 
to 66,063,258 tons, and an additional quantity of 18,618,828 tons 
was shipped as bunker coal for the use of steamships chiefly engaged 
in the work of helping the British to get rid of their fuel resources. 
In addition to this direct exportation of mineral fuel a large part 
of the remaining 183,000,000 tons retained for domestic consumption 
was consumed in creating energy for factories whose products are 
often shipped to countries nearer the supplies of raw material and 
with ampler fuel resources than Great Britain. 

Despite the optimistic view of the professional economists and 
the absurd calculations of the geologists, the fruits of this suicidal 
course are already exhibiting themselves in the increasing price 
of coal and a corresponding increase in the cost of manufacturing 
in the United Kingdom. Even while the defenders of the wasteful 
system of presently profiting by the inconsiderate use of coal are 
arguing that the measures of the kingdom will last for hundreds 
of years, governments are compelled to recognize the menace of 
increasing prices and reluctantly consent to taxation measures 
designed to lessen exportation. 

As in the case of coal, no regard has been paid by the British 
to the danger involved in the encroachment upon their store of iron 
ores. The assumption has been that when they were exhausted it 
would be possible to obtain supplies from other lands. This has 

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88 The Annals of the American Academy 

been done for several years, until now a large proportion of all the 
iron and steel manufactured in the United Kingdom is produced 
from ores derived from Spain and other countries. The conse- 
quences are visible in the increasing difficulty experienced by the 
British in maintaining their position in the industry. The troubles 
that now confront them, however, will seem insignificant when the 
time comes, as it surely will, when nations shall attempt to conserve 
their resources by following the example set by Great Britain when 
she placed an export duty on coal. 

It ought not to need much argument to demonstrate that it is 
uneconomic to pursue such a course as that outlined in the preceding 
comment. Even if Great Britain could implicity depend on unfail- 
ing supplies of coal and iron from other countries when her own 
measures are exhausted, or can no longer be profitably worked, it 
must be obvious that it is wasteful to export, in one form or 
another, perhaps 100,000,000 tons of coal annually, if at some future 
time she will be compelled to import coal from other parts of the 
world. 

But we need not go abroad for awful examples. We are begin- 
ning to find them at our own door. If this were not the case we 
should not hear of conferences being called to consider the con- 
servation of the natural resources. If the tremendous and con- 
stantly increasing consumption of coal and iron in the United States 
was not causing alarm, we should not have been afforded an exhibi- 
tion of wise men in council studying and suggesting methods of 
preventing wastefulness. 

It is doubtful, however, w^hether these conferences will accom- 
plish more than to direct attention to the subject, for those who 
attend them persist in approaching the matter from the standpoint 
of economists, who think the prosperity of a nation is dependent 
on the multiplication of middlemen, and whose teachings inevitably 
tend to create the impression that trade is of more importance than 
production. This state of mind is reflected in the importance 
attached to transportation facilities, and the refusal to consider that 
a vast quantity of the hauling to and fro which is constantly in 
progress is positively wasteful. 

When the benefits of facile transportation are abstractly consid- 
ered the claims made for it seem to be warranted, but when we 
turn our attention to what is being done by shrewd men, such as 



Waste in External Trade 89 

those who administer the affairs of the Standard Oil Company, we 
speedily discover that when unregulated its tendency is toward 
wastefulness. The organization referred to finds it expedient to 
prohibit the shipping of its products from points other than those 
nearest the seat of consumption. It forbids patrons in Missouri 
selling to consumers in Ohio oils produced in Pennsylvania. The 
establishment of zones of this sort is undoubtedly in restraint of 
trade, but it unquestionably prevents waste, for obviously it is waste- 
ful to ship oils from Pennsylvania to St. Louis and then reship them 
eastward to points hundreds of miles nearer to the field of produc- 
tion. 

It may seem radical to propose that government should deal 
with an economic problem just as sagacious business men would, 
and it is not likely that such a proposition will be acted upon until 
necessity enforces such action. But the time will come, sooner or 
later, and much sooner than most of us expect, when a complete 
reversal of the present uneconomic policy, which is fostered by the 
provision of the federal constitution, that forbids the collection of 
export duties, will be demanded by the nation. 

To urge such a probability at a time when an insistent demand 
for a revision of the tariff comes from a quarter which has hitherto 
enjoyed the benefits of the protective system may seem absurd to 
some, but it is infinitely more absurd to hold conferences to study 
means of conserving the natural resources and almost in the same 
breath clamorously demand the adoption of a policy which must 
inevitably result in their depletion by wasteful methods. 

The demand for revision, which has the support of a large 
section of the manufacturing interests of the country^ is largely 
based on the supposition that it will increase our markets abroad. 
The same elements which favor the conclusion of reciprocity treaties 
demand revision, and their objective is the extension of our foreign 
markets. In every instance of which we have knowledge the treaties 
made for reciprocal trading, when they result in its increase, have 
been at the expense of true economy. Their invariable effect is to 
cause waste in transportation and to stimulate still further the effort 
to get rid of the natural resources. 

Entertaining these views, I am impelled to urge that in consid- 
ing "our tariff relations with the Orient, actual and desirable," the 
subject should be approached not from the standpoint of the manu- 

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90 The Annals of the American Academy 

facturer, who pertinaciously demands the right to profit at the 
expense of the nation by getting rid of its irreplaceable resources 
as rapidly as possible, but from that of the man who takes some 
thought of the future and who realizes that nations, no more than 
the foolish virgins of the Scriptures, who wastefully consumed their 
oil, can escape the penalty of such folly. 

When the literature on the subject of the extension of our trade 
with the Orient is examined the discovery is made that the optimists 
base their opinion of its future greatness on our ability to supply the 
Orientals with manufactured articles, into whose production the raw 
materials whose rapid consumption is causing alarm will enter in 
large quantities. Only the uninformed imagine the possibility of our 
becoming exporters on a considerable scale to Eastern countries of 
the products of the soil. The thrift of the Asiatic and our own 
future necessities make such an assumption seem irrational. 

In the event of an Asiatic development on the scale which some 
predict, and many believe probable, the demand from Western 
countries will be chiefly for manufactured articles. In the nature 
of things it cannot continue for a long period, for if the movement 
toward the adoption of the habits of the West becomes a dominant 
factor in the development of Eastern Asia, it will result in the crea- 
tion of formidable competitors, as the Asiatics, in spite of their 
backwardness, are a very capable people as the recent progres of 
Japan conclusively demonstrates. 

The probabilities favor the belief that the Oriental nations in 
their awakening, and while they are building themselves up, will 
make immense demands upon our irreplaceable resources. Some idea 
of the extent of the demand may be gained from the statement 
made that the United States Steel Corporation is negotiating with 
Russia one of the largest steel-rail contracts ever made. If the 
contract is concluded, the corporation will supply over a million 
tons of steel rails for retracking the Siberian road. It is not unlikely 
that China may make even larger demands upon our resources. 

No one will dispute that the immediate result of an extension 
of trade with the Orient on these lines w411 prove profitable to the 
nation. It cannot fail to stimulate national prosperity, by giving 
employment to large numbers of workers, who in turn contribute 
to the general welfare by expending their earnings. But if there is 
any foundation for the assumption that we are encroaching upon 

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Waste in External Trade 9I 

our irreplaceable resources ; if the recent White House conference 
was not an unnecessary bit of pessimism, then the prosperity which 
is thus purchased will be of the same sort a dissipated heir enjoys 
while getting rid of his inheritance without attempting to do any- 
thing to replenish his coffers. 

It therefore becomes incumbent on statesmen to inquire how 
much reason there is for believing that our resources are being 
impaired, and if the conclusion of the conferees at the White House 
that ''the forests which regulate our rivers, support our industries 
and promote the fertility and productiveness of the soil should be 
preserved and perpetuated, and that the minerals found so abun- 
dantly beneath the surface should be so used as to prolong their 
utility," is sound, then it is their duty to shape the laws so that 
these purposes may be accomplished, even if the result is to com- 
pletely upset the theories of the economists who teach that mankind 
is benefited by wasteful methods. 

In an article such as this it would be impossible to present the 
evidence that demonstrates the soundness of the assumption that 
the natural resources are rapidly being dissipated, nor is it neces- 
sary to do so, as the papers read by the conferees at the White 
House are easily accessible. It is sufficient to quote Carnegie's 
undisputed statement, that our processes of mining and our methods 
of consuming coal are wasteful, and that our supply of iron ore, 
at the present rate of consumption, will not last one hundred years. 

In 1881 the output of coal in the United States was 85,881,039 
short tons; in 1907 it had increased to 488,800,000 tons. The 
increase in a single year, from 1906 to 1907, was over 90,000,000 
tons. A quarter of a century ago the prediction that our output 
would increase fivefold in twenty-six years would have been deemed 
preposterous. The assumption that the next twenty-six years will 
witness a like increase must appear equally incredible, yet failure 
to keep the pace means an interruption to what we have hitherto 
considered commercial progress. 

The Birkinbine engineering offices of Philadelphia recently 
issued a chart illustrating the expansion of the pig-iron industry of 
the United States between 1890 and 1907, which developed the inter- 
esting facts that the product had increased from ^2"/ pounds per 
capita in the first-named year to 675 pounds in 1907, or 106 per cent, 
and that the price, despite the enormousness of the output, had 

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92 The Annals of the American Academy 

greatly increased, both absolutely and relatively, as measured by 
the currency in circulation. A leading journal, commenting on this 
presentation, remarked : "The chart shows the phenomenal growth 
and the great commercial value of our iron industry," and it doubt- 
less voiced the opinion of men of affairs throughout the land ; and 
the judgment would probably be the same if the quantity produced 
were 60,000,000 or 100,000^000 tons annually, instead of the 
27,000,000 tons reached in 1907. 

From the standpoint of the economist w^ho deals wholly with 
the present, the enormously increased output of coal and pig iron 
must be regarded as beneficial. When a people are able to annually 
consume 675 pounds per capita of a useful metal like iron, they are 
apparently in better case than they were when their consumption 
was less than one-half that quantity. But the benefit is of the most 
transitory character and more apparent than real. If the output of 
iron and coal could be indefinitely increased, the benefit would be 
indisputable, but as they are both limited in quantity and practically 
irreplaceable, their injudicious use can only be compared with that 
of a lot of shipwrecked mariners w^ho prodigally consume their store 
of provisions while adrift on a raft in midocean. 

The analogy is complete. So far as the use of iron and coal 
is concerned, we are proceeding even more insanely than mariners 
who would improvidently consume their store of provisions when 
menaced by the possibility of rescue being long deferred, for we 
have adopted a commercial policy which economists extol, of getting 
rid of our irreplaceable commodities by selling them to foreigners 
who, under proper stimulus, could provide themselves from their 
own stock. To extend the simile of the shipwrecked mariners, our 
action resembles the inconceivable folly which an insane sailor on 
the raft would display if he threw part of his bread to the fishes 
and thus deliberately increased the chance of starvation. 

If there is any doubt on this point it will be speedily resolved 
by studying the import of a demand made upon the Interstate Com- 
merce Commission at one of its recent sittings, where it was shown 
by the representative of the Harriman lines that imless the trans- 
continental railroads were permitted to charge a lesser rate for 
freight dispatched over their lines to the Orient than that exacted 
from shippers of domestic goods they would not be able to compete 
with the Suez route, as nearly all the goods shipped to Eastern 

(356) 



Waste in External Trade ' 93 

Asia via the transcontinental railroads and steamships sailing from 
Pacific ports of the United States came from the territory east of 
Chicago and close to the Eastern seaboard. 

A large part of our Oriental business is made up of manufac- 
tures of iron. The probability of securing a million-ton contract 
to supply the Siberian railroad with rails of American manufacture 
has already been noted, and the tables of exports show that we are 
now shipping large quantities of rails, wire nails, machinery 
and other iron products to Asiatic countries. We are also exporting 
considerable quantities of raw cotton by direct and circuitous routes 
to Eastern Asia. 

It is not necessary to state with exactness the extent of the 
trade already developed. It is, however, of considerable conse- 
quence and is a serious factor in the inroads made upon our natural 
resources, especially those of iron and coal, and incidentally of 
timber. But if it were insignificant at present, we have to consider 
the fact that the avowed purpose of the advocates of a revision of 
the tarifif as it relates to Oriental countries is to stimulate to the 
utmost our export trade to them by the dubious device of admitting 
their products to this country at lower rates of duty than are 
exacted at present. 

It would be a work of supererogation to point out that a policy 
of ''forcing out" such as that outlined in the proposals of the tariflf 
revisionists to stimulate exports of iron and coal to Asiatic countries 
is in the highest degree inconsistent with the demand for the con- 
servation of the natural resources of the country. Such a course 
may temporarily promote prosperity, but the inevitable result will 
be to hamper future commercial progress by making iron, coal and 
timber dearer and less accessible to the domestic consumer. The 
remarks of the author of ''Made in Germany," in commenting on 
the draft made upon the coal measures of the United Kingdom, 
are applicable to us: "Every ton of coal extracted from our coal 
fields," he said, "implies a permanent loss of wealth to that amount. 
The coal doesn't grow again. . . . When you send it away to 
the foreigner to feed his factories, which destroy or injure your fac- 
tories and take in return from him foodstuffs, . . . you are 
letting your land deteriorate." 

It is impossible to dispute this ; the conclusions of the conserva- 
tion conference are in perfect accord with the deduction, yet the 

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94 The Annals of the American Academy 

disposition exists (and it will probably prevail) to disregard the 
consequences by continuing the fatuous policy of getting rid of our 
resources as rapidly as fancied immediate commercial needs demand. 
In the future, as in the past, the only concern of statesmen will be 
the present. Any proposition which suggests an impairment of the 
facilities for converting the natural resources of the country into 
immediate profit will receive scant courtesy from those who legislate 
for us and will be derided by the classes whose ideas of national 
prosperity are bounded by consideration for the immediate present. 

I say this in full consciousness of the earnestness of the advo- 
cates of conservation, and the apparent progress made by the move- 
ment for the protection of the forests and the preservation of the 
mineral lands still in the possession of the government. The suc- 
cess of the latter is wholly dependent upon the fact that individual 
interests are not directly involved. The policy of conservation would 
have achieved success had it been inaugurated three-quarters of a 
century ago ; but now that the major part of the country's forests 
have disappeared, and nearly all the valuable mineral lands are in 
the hands of private persons, the almost insuperable difficulty attend- 
ing regulation when individualism has thoroughly established itself, 
as it has in the United States, will prove a constant obstacle to 
consistent efforts to conserve. 

Before the Vv^orld can achieve real economies through con- 
servation, it will be absolutely necessary to destroy the impres- 
sion that all trade is beneficial to mankind. We shall have to learn 
to distinguish between that which is economical and that which 
tends to waste. Protection should have developed this knowledge, 
but it has failed to do so because its advocates have not clearly 
perceived that its paramount function was the elimination of waste 
by bringing consumer and producer as closely together as possible. 

There has always been a confusion in the protectionist mind 
on this latter point, and it is responsible for the vagaries of the 
advocates of reciprocal trade, whose estimates of the national pros- 
perity are based on the figures of exports and imports, and who 
have become blinded to the fact that the increasing volume of the 
latter may indicate growing wastefulness and therefore not pro- 
ductive of a prosperity whose genuineness is evidenced by the 
permanence of its results. 

No rational economist, when the matter is squarely presented 

(358) 



Waste in External Trade 95 

to him, will dare to assert that the prosperity of to-day, which will 
inevitably produce scarcity in the near future, is desirable. To 
maintain such a position he would have to defend the practices of 
nomadic savages, with whom life is a feast or a famine. It would 
seem, then, that every effort and every teaching should be directed 
to shaping our industrial and commercial energies, so that the 
elimination of waste shall be the first consideration of statesmen. 
In short, we should live up to the theories which found expression 
in the conservation conference. 

We can do so in our dealings with the Orient if we frame our 
tariff schedules with a view to discouraging rather than to encour- 
age the importation from Asiatic countries of products which we 
may produce ourselves. If we bring ourselves to realize clearly 
that the forcing out of our irreplaceable products, which results 
from the feverish desire to exchange them for things which we do 
not need, or which we could produce ourselves, will invite disastrous 
consequer^ces in the near future, we shall approach the subject of 
conservation in the right frame of mind. If, for instance, the 
generality could or would grasp the fact that the direct or indirect 
exchange of millions of tons of coal and iron for the products of 
Asiatic silkworms spells dearer coal and iron not many years hence, 
the uneconomic character of this branch of Oriental trade would be 
conceded, and it is typical of the major part of our trade with Asia, 
and for that matter of most international exchanges. 

I am aware that advocacy of a reasonable restriction of trade 
will be met with the rediictio ad absurdum. Some one will say: 
"Why not carry out the theory in this country and stop waste by 
restricting wasteful trading between the peoples of the various po- 
litical sub-divisions." The answer is simple enough. In the case of 
a man who is impairing his health by intemperate eating and drink- 
ing, a judicious doctor will warn him to put some restraint on his 
appetite, but he would hardly make the blunder of advising him to 
wholly cease eating. 

It is plainly apparent that the very things which a consensus 
of opinion credits with being the great sources of modern pros- 
perity — iron and coal are limited in quantity. Visionaries tell 
us that when they are all gone the world will find something to take 
their place. But economists have no right to assume anything of 
the kind. It is their business to deal with the known resources, 

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96 The Annals of the American Academy 

and if they can, to point out how they can be conserved. Some- 
thing in that direction can be accomplished by a resort to a tariff 
based wholly on the idea of making the best use of what we have 
so that there may be something left for the future. We must get 
rid of the absurd notion that we are benefiting by burning our 
candle at both ends. We will have to divest ourselves of our pride 
in a railroad system which consumes millions upon millions of tons 
of iron and coal annually, and ask ourselves how much of the work 
it performs represents absolute waste and how much genuine service. 

Such an inquiry will have to go a step further than the sugges- 
tion embodied in Andrew Carnegie's presentation of the fact that 
"moving 1,000 tons of freight by rail requires an eighty-ton loco- 
motive and twenty-five twenty-ton steel cars (each of forty-ton 
capacity), or 580 tons of iron and steel, with an average of, say, ten 
miles of double track (with ninety-pound rails), or 317 tons addi- 
tional, so that, including switches, frogs, fish plates, spikes and 
other incidentals, the carriage requires an equal use of metal," 
whereas *'the same freight may be moved by water by means of 
100 to 250 tons of metal, so that the substitution of water carriage 
for railway carriage would reduce the consumption of iron by 
three-fourths to seven-eighths in this department, reducing at the 
same time the consumption of coal for motive power from 50 to 75 
per cent, with a corresponding reduction in the coal required for 
smelting." If we are really in earnest in the matter of conservation 
we shall endeavor to learn how much of the 21,653,795,696 tons of 
freight moved one mile in 1906 by the 55,439 locomotives and the 
nearly 2,ooopoo freight, baggage and express cars operated on 
American railroads was uselessly hauled, and take steps, not merely 
to reduce the waste by substituting water carriage, but to eliminate 
it wholly, if possible, by dispensing with unnecessary hauling wher- 
ever practicable. 

Water carriage is unquestionably cheapest when available, 
and the fact that we have deliberately neglected our waterways is 
overwhelming evidence of our prodigality in more ways than one. 
But those who lay too much stress on the desirability of substitut- 
ing that method of transportation for the more costly movement of 
freight by rail are apt to close their eyes to the wasteful features 
of the former. Ten years ago the writer called attention to a 
peculiarity of British external trade, by instancing that in 1896 the 

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Waste in External Trade QfJ 

exports of coal from the United Kingdom constituted 84.7 per cent 
of the quantitative volume of the export business of that country 
during the year named. Or, as the British author from whom the 
information was derived put it: "Coal enters into practically the 
whole of our exports and probably forms the cargo of over 50 per 
cent of the tonnage cleared from the United Kingdom." Since 
1896 the exports of coal from the United Kingdom have increased 
from 44,200,000 tons to 66,063,258, and the bunker coal in 1897 
reached 18,618,828 tons. 

There is no attempt to dispute the assertion that the exporta- 
tion of British coal is causing a steady rise of the price of that 
commodity in Great Britain, nor that the recent export tax on coal 
was advocated on the ground of conservation, but the British are 
afraid to look the situation squarely in the face. They have cre- 
ated a condition for themselves which they feel admits of no mend- 
ing except by a resort to heroic methods, that would involve a sacri- 
fice on the part of the present generation which it is not ready to 
make. The United States and other new countries, however, are 
in better case. It is not imperatively demanded of us that we shall 
exchange our irreplaceable iron and coal and our timber resources 
for foodstuffs produced by other peoples. We can easily feed and 
clothe our population, and in accomplishing that result, by bringing 
consumer and producer closer together, we shall automatically 
eliminate the waste which ensues when energy and resources are 
uselessly expended. 

While under the hallucination that the world becomes richer 
by wasting its energies in useless transportation, we listen to the 
plans of those who foolishly imagine that their country and mankind 
can be benefited by getting rid of natural resources which cannot be 
replaced. In the category of such advocates must be placed those 
who imagine that the exportation of vast quantities of iron and the 
products of iron to Asiatic countries will contribute to American 
prosperity. It may temporarily produce that result, but the inevit- 
able outcome of the policy will be future deprivation. We cannot 
eat our cake and save it at the same time. 

The views here expressed may just now seem extreme, and the 
natural inference from them that the most practicable w^ay of con- 
serving resources is through trade regulations will prove repugnant 
to the vast number of people who believe absolute freedom of trade 

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98 The Annals of the American Academy 

is a promoter of prosperity. The units composing the trading world 
are now imbued with the idea that the destruction w^hich is profitable 
to the individual is not only justifiable but beneficial to mankind. 
The individual owner of forest lands is ready to profit by their 
denudation, and does not ask what the consequences will be to 
other than himself. But a state of the public mind is rapidly being 
created which will not shrink from placing restraints on the owners 
of timber lands, and this will soon be followed by a like imposition 
on the owner of iron mines and coal measures. A step in that 
direction which will not seriously impinge upon the individualistic 
theory will be the enactment of tariflf laws which will have the effect 
of discouraging exports that involve waste of the natural resources 
of the country and future scarcity and consequent dearness, 



(362) 



OUR TARIFF RELATIONS WITH THE PHILIPPINES, 
ACTUAL AND DESIRABLE 



By General Clarence R. Edwards, U. S. A., 
Chief, Bureau of Insular Affairs, War Department. 



At present our tarifif on imports from the Philippine Islands Is 
governed by section 2 of the Act of March 8, 1902, entitled "An 
act temporarily to provide revenue for the Philippine Islands, and 
for other purposes." Briefly this provides that on all articles com- 
ing into the United States from the Philippine Archipelago the 
rates of duty shall be those paid on like articles imported from for- 
eign countries, with the proviso that on such articles, the growth 
and product of the Philippine Archipelago, there shall be collected 
but 75 per centum of the aforesaid rates. 

On articles imported into the Philippine Islands from the 
United States there is imposed the same rate of duty as upon the 
same articles from foreign countries. 

Article 4 of the treaty of Paris, between the United States and 
Spain, provides that: 

The United States will, for the term of ten years from the date of the 
exchange of the ratifications of the present treaty, admit Spanish ships and 
merchandise to the ports of the Philippine Islands on the same terms as ships 
and merchandise of the United States. 

Ratifications were exchanged at Washington on April ii, 1899. 
Under the terms of this treaty Spanish goods were entitled to the 
same treatment on importation into the Philippine Islands as Ameri- 
can goods, and for obvious reasons this same treatment was extended 
to the goods of all foreign countries. Thus the American exporter 
has received no preferential treatment in the Philippine m.arket 
other than the very slight advantage which may have been given 
him by the description of articles under the various schedules of 
the Philippine tariff. Where articles could be so described as to 
benefit the American exporter it has been done. 

Reverting to the 25; per cent reduction of duty granted to arti- 
cles produced in the Philippine Islands, on importation into the 

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loo The Annals of the American Academy 

United States, it may be sta4:ed that this reduction has been of no 
advantage whatever in increasing our trade with the PhiHppine 
Islands. The principal articles exported from the Philippine Islands, 
with the exception of sugar and tobacco, are on the free list, and 
would, therefore, receive no advantage from this reduction. There 
is, because of non-use of the Philippine tobacco in the United States, 
no demand therefor, and the 25 per cent reduction has not been 
sufficient to warrant experiments as to its introduction. In the 
matter of sugar the 25 per cent reduction has likewise been insuf- 
ficient to attract Philippine sugar in any material quantity to our 
markets. The amount heretofore imported, omitting speculative ship- 
ments during one year, is negligible. It may be added that the 
speculation was unfortunate. 

Briefly, the tariff laws, both of the United States and the 
Philippine Islands, are such as not to specially encourage trade 
between the United States and its Far Eastern possessions. The 
Philippine Islands are to the American exporter a foreign market. 
He must compete therein on equal terms with the various European 
and Eastern exporters. On the other hand, the United States tariff 
is such as to offer no inducements to the Philippine producer. 

With the exception of Manila hemp (abaca), which has been 
attracted to the United States in increasing quantities by legislation 
w^hich provides for the return of the export duty, in the case of 
hemp coming directly from the Philippine Islands, for use and 
consumption in the United States,^ we receive now no more of the 
products of the Philippine Islands than we did in 1902 on the estab- 
lishment of civil government in those islands. On the other hand, 
we export to the Philippine Islands no more goods now than we 
did at that time. 

On April 11, 1909, the ten-year period, during which we have 
granted to Spanish merchandise the same treatment in the Philip- 
pine Islands as extended to our own, will expire. This will remove 
one of the obstacles to such legislation as we deem wise In our 
efforts to create more favorable trade relations with our Eastern 
possessions. 

That we can very materially increase our exports to those 
islands does not admit of question. Seven years ago legislation was 
enacted providing for the free admission of American goods into 

^Paragraph 406, section 13, Act of March 3, 1905. 

(364) 



Our Tariff Relations with the Philippines lOI 

Porto Rico, and, reciprocally, providing for the free admission of 
Porto Rican goods into the United States. These provisions have 
resulted in increasing the external commerce of Porto Rico from 
$18,000,000 to $50,000^00 per year, and practically 90 per cent of 
its imports come from the United States. 

During the same period the external commerce of the Philip- 
pine Islands has been practically at a standstill, and to-day less 
than 20 per cent of its imports come from the United States. 

In so far as trade with our Far Eastern possessions is concerned, 
the effort to amend the United States and Philippine tariffs has in 
view two principal objects ; the first, to make the Philippine Islands 
a part of the United States home market, and the second, by pro- 
viding a better market for the raw products of the Philippine 
Islands, to increase the purchasing power of the islands, thus 
increasing to the United States exporter the value of the market. 

Comparison with results obtained in Porto Rico leads to the 
conclusion that if American goods are admitted free of duty 'into 
the Philippine Islands, instead of furnishing 20 per cent of the 
goods imported into those islands, the United States will furnish 
more than 80 per cent, and if Philippine products are admitted free 
into the United States, the imports into the islands will be at least 
$100,000,000 a year, instead of $33,000,000, as at present. 

Specifically, what is desired by those urging closer trade rela- 
tions with the Philippine Islands is the free admission into the Phil- 
ippine Islands of imports from the United States, and the free admis- 
sion into the United States of all articles the growth and product 
of the Philippine Islands. 

The objections to this, in addition to the one resulting from 
the treaty of Paris, referred to above, and which will be removed on 
April II, 1909, have been: First, at the time of the enactment of 
the Philippine tariff the islands were without suitable laws govern- 
ing internal taxes. The receipts of the custom house were abso- 
lutely essential to the maintenance .of a government in the islands, 
and it was felt that the free admission of goods from the United 
States would reduce the customs receipts of the islands below the 
minimum demanded by the conditions then existing; second, the 
fear fostered by representatives of sugar and tobacco industries that 
the free admission of sugar and tobacco from the Philippine Islands 
would injure those industries in the United States. The claim was 

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I02 The Annals of the American Academy 

not that the present production was sufficient to work injury, but 
that, under the stimulus of the United States market, the produc- 
tion would be greatly increased; third^ the claim put forward by 
certain so-called "Anti-Imperialists" that closer trade relations with 
the Philippine Islands would render it more difficult to grant the 
political separation which they advocated. 

These objections have briefly been met as follows : We have now 
in the Philippine Islands suitable laws governing internal taxation, 
and the income from that source is such that the government could 
be satisfactorily administered even with the loss which would result 
to the customs revenues from the admission free of duty of imports 
from the United States. 

The second objection, while it is believed to be groundless, has 
been met by a proposition to limit the amount of sugar and tobacco 
which shall be admitted free of duty into the United States in any 
year to an amount which would notoriously not affect in any way 
those interests in the United States. 

The third objection has never been urged by any considerable 
number, and has been satisfactorily met from the first by the simple 
fact that whatever may be our future political relations with the 
Philippine Islands, it is desirable that we should have and hold as 
large a share in the trade of those islands as possible. Nor is the 
arrangement which it is proposed to bring about one which we 
would not desire even though those islands were politically separate 
from the United States. 

It does not require a very deep study of this subject to show 
that the proposed legislation is not wholly to the advantage of the 
Filipino. As a result thereof the United States adds to its home 
market 8,000,000 people, and by extending to these people a market 
in turn for their products — products which in large part compete 
with no article of American production — it but increases their pur- 
chasing power and makes the market acquired more valuable. The 
enactment of this legislation does not call for charity, but, as has 
well been said, for "enlightened selfishness." 



(366) 



THE CONVENTIONAL TARIFF SYSTEM 



By N. I. Stone, 

Tariff Expert, Department of Commerce and Labor, Washington, D. C. 



The Origin of the Present Tariff System in Germany 

The German tariff system at present in vogue may be said to 
date from 1891, when Germany concluded a number of reciprocity 
treaties with neighboring countries. While it cannot be said that 
reciprocity treaties among nations, based upon mutual concessions 
in the matter of customs duties, were unknown before that date, 
yet the fact remains that the present German system marks a dis- 
tinct departure in the tariff policies of European nations, which are 
adopting it in growing numbers. 

Other nations, including our own, had negotiated reciprocity 
treaties from time to time ; but, taking the United States as an 
illustration, they were mostly sporadic, like our treaty with Canada 
in 1855, or with Hawaii in 1875. They were more in the nature of an 
extraneous graft upon our tariff tree, than an organic part of it. 
The fact does not seem to be realized generally that it is not the 
treaties that supplement the German tariff, but, on the contrary, 
the tariff as daily applied to German imports from foreign countries 
is largely made up of the rates fixed by those treaties. True, France 
preceded Germany in the adoption of a system of reciprocal trea- 
ties, but this was the outgrowth of a policy of Napoleon HI, who, 
largely for political reasons, aimed at removing existing tariff bar- 
riers in the international trade of France, his treaties having for 
their object and effect the adoption of what came to be very near 
free trade. No sooner had it become clear, however, that continental 
Europe had definitely turned its back upon free trade than the 
French resolved to return to autonomous tariff legislation. 

It was at this point that Germany stepped into the shoes of her 
Western neighbor, but in adopting what was apparently the same 
system the Germans made it serve a new purpose: the regulation 
of the tariff with a two-fold object in view, protection to home indus- 
tries and the lowering of tariff barriers to domestic products in 
foreign markets. 

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I04 The Annals of the American Academy 

Briefly told/ the history of the adoption of the present tariff 
poHcy by Germany is as follows: After a brief interval of free 
trade, which the German empire inherited from the Zollverein in 
1 87 1, a protective tariff was adopted in 1879 in response to the 
demands of the manufacturing element, especially the iron and tex- 
tile industries, which were hard pressed by English competition. 
Under this tariff German industries took a new lease of life, and in 
a decade reached such proportions as to completely overreach the 
capacity of the home markets for absorbing their output. As most 
of the European countries had in the meantime adopted protective 
tariffs, Germany's foreign trade was greatly hampered. It was felt 
to be necessary to secure in those countries a reduction of duties 
upon the products which Germany exported. It was realized, of 
course, that the only basis for negotiations with foreign nations 
looking to that end lay in mutual concessions or reductions of duty. 
The same interests that were instrumental in bringing about the 
adoption of the protective tariff in 1879 were now most active in 
demanding the adoption of reciprocity treaties. The protective tariff 
having accomplished the object for which it was intended, to enable 
the German industries to get on their feet, these industries now felt 
able to meet foreign competition at home. They were, therefore, 
willing to forego the advantage of continued protection at home if, 
in return for the advantages surrendered, they could obtain greater 
facilities for entering foreign markets. 

The imperial government, accordingly, entered into negotiations 
with foreign nations, resulting in the conclusion of reciprocity 
treaties for a period of twelve years with seven countries : Russia, 
Austria-EIungary, Italy, Switzerland, Belgium, Roumania and 
Servia. The negotiations were conducted on the basis of the then 
existing tariff of 1879, which was thus greatly reduced as a result 
of the treaties. The new reduced tariff, made up of the rates of 
duty agreed upon in the seven treaties or conventions, came to be 
known as the conventional tariff, while the old tariff of 1879, which 
still remained on the statute books, was called "general" or "autono- 
mous." The application of the conventional tariff was not con- 
fined to the seven nations with which treaties had been concluded. 

^For a more complete account of the history of the adoption of the German 
tariff, the reader is referred to articles by the present author in the North American 
Review, March and September, 1905, and the Review of Reviews, December, 1905. 
See also Percy Ashley, Modern Tariff History. 

(368) 



The Conventional Tariff System 105 

It was extended to imports from all countries with which Germany 
had most-favored-nation treaties, and as these comprised practi- 
cally all the nations with which Germany carried on commerce of 
any importance, the autonomous tariff of 1879 remained simply on 
paper except for those rates which were not affected by any of the 
seven treaties. 

The experience of Germany under the conventional tariff was 
so satisfactory that before the twelve-year period for which the 
treaties had been concluded had expired, in December, 1903, it was 
resolved to continue the operation of that system. In the meantime, 
however, great economic changes had taken place. The quarter 
of a century which lay between 1879, when the autonomous tariff 
was adopted, and 1904, when the conventional tariff was to termi- 
nate, witnessed the great decline of the agricultural and more than 
proportional development of the manufacturing industries in the 
scale of relative importance in the empire. In 1879 the Agrarian 
party was an ardent advocate of free trade, because Germany 
depended on foreign markets as an outlet for its excess of cereals 
and other farm products, while at the same time the agricultural 
population had to depend on British and French sources for its 
supply of cheap agricultural implements and other articles of per- 
sonal use. By 1900 the situation had undergone a radical change. 
Not only had Germany ceased to be an exporter of cereals, but, 
owing to competition of the United States, Argentina and Russia 
were obliged to become importers of grain. The owners of large 
German estates found it impossible to compete with the cheap agri- 
cultural products, not only grain, but cattle and meats, raised on 
virgin soil with but a slight expenditure of human labor. The cry 
of protection now came loudest from the agrarian camp, which also 
evinced great hostility to reciprocity treaties. In any event the 
demand was made for a revision of the tariff for the purpose of not 
only greatly raising the duties on agricultural products, but also of 
making the increased protection safe from encroachment through 
the conclusion of new treaties. 

On the other hand, the manufacturers were for the most part 
satisfied with the existing duties and were even willing to go to the 
extent of still further reductions if, by so doing, they could secure 
reductions in the tariffs of foreign countries. Both sides agreed 
as to the necessity of a thorough revision of the tariff before the 

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io6 The Annals of the American Academy 

expiration of the reciprocity treaties; the agrarians, because they 
wanted increased protection, the manufacturers and exporters, 
because they desired more scientific and up-to-date classification of 
commodities. 

In pursuance of this practically unanimous wish, the govern- 
ment undertook the preparation of a draft of a tariff bill, which 
consumed five years of labor on the part of a special commission 
of thirty-two representatives of the agrarian, manufacturing and 
commercial interests, acting in co-operation with the tariff experts 
of the treasury and other government departments, in addition to 
2,000 trade and technical experts, w^ho were consulted by the com- 
mission from time to time. The tariff bill which resulted from 
these labors was introduced in the Reichstag by the government 
early in 1902, and after about ten months' deliberation, passed, with 
some changes^ on December 25, 1902. It contained but one set of 
duties, with the exception of rye, wheat, barley and oats, for which 
both general and minimum rates were provided to prevent further 
reductions through reciprocity treaties. 

The government immediately took up negotiations with foreign 
countries for new reciprocity treaties, which proved more difficult 
than had been anticipated. As the treaties could not all be con- 
cluded before the end of the year 1903, when the old treaties were 
to expire, the latter were by mutual consent allowed to remain in 
force for more than two additional years. On February 22, 1905, 
the Reichstag ratified the seven treaties concluded with the nations 
which had maintained reciprocal tariff agreements with Germany 
since 1891, and the country was given a year's time to prepare for 
the new conventional tariff, the inauguration of which was set for 
March i, 1906. The new treaties were likewise concluded for a 
period of twelve years, so that the present tariff of Germany cannot 
be materially changed before January i, 1918, and is likely to remain 
in force somewhat longer. In addition to the seven nations men- 
tioned, commercial treaties or agreements have been concluded with 
Sweden, Bulgaria, Greece and the United States, and negotiations 
with other countries are also pending. 

7^ the Conventional Tariif System Desirable? 

The answer to that question is determined by the end for w^hich 
the tariff of a country is intended. The conventional tariff system, 



The Conventional Tariff System 107 

as at present in vogue, is the result of a natural evolution that 
accompanied the growth of modern industry on a large scale with 
its resultant expansion of international commerce. As long as the 
productive capacity of a nation does not exceed the consumptive 
capacity of its own people there is no need for a conventional 
tariff. Such a nation will either find it necessary to adopt an 
autonomous protective tariff, if competition from foreign countries 
should interfere with the development of its own industry, or a 
moderate tariff for revenue purposes only, if it has no industries to 
develop {e. g., Turkey), or is strong enough not to fear foreign 
competition {e. g., Great Britain). In any of these cases one tariff 
consisting of a single set of duties applicable alike to all foreign 
nations is all that will be adopted. As soon, however, as the prin- 
cipal industries of a country assume proportions in which the 
national boundaries cease to be a bulwark of protection and turn 
into a hindrance to the free outflow of their products to the world's 
markets, the single tariff ceases to satisfy the needs of the hour. 
The answer, therefore, is plain that a nation reaching the stage of 
industrial and commercial development such as characterizes the 
present condition of the United States must, in the interests of the 
very industries which have been built up with the aid of a protective 
tariff, take steps to bring about a removal of the obstacles which in 
the form of excessive duties or other restrictive legislation interfere 
with the circulation of its products in foreign markets. But a most 
cursory survey of the international field reveals the fact that 
similar conditions prevail in many of the countries to which we wish 
to gain more ready access for ourselves, and that the only way this 
can be done is by way of mutual concessions. 

This explains why the movement for reciprocity w^hich calls for 
tariff reduction is led by manufacturers not only in this but in all 
countries where similar conditions prevail. 

Is the Conventional Tariff System Practicable f 

But granting the desirability of a tariff system w^hich lends 
itself to the double purpose of securing necessary protection at 
home as well as opening the doors of foreign markets, the question 
arises as to whether the conventional tariff* system is practicable. 
Here we must leave the ground of speculative reasoning and take 
up the question in its national aspects, viewing it from the stand- 

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Io8 The Annals of the American Academy 

point of concrete facts and economic and political conditions which 
go to make up our body politic. 

There can be no question that the conventional tariff system 
in the hands of Germany has proved to be very efficacious and has 
enabled that country to achieve the ends for which it was designed. 
Nor can there be any doubt that Germany has fared far better 
with her conventional system, than France with her general and 
minimum tariffs. The experience of these two leaders among the 
nations of the European continent, as well as that of their respective 
followers, has led to the gradual abandonment of the general and 
minimum tariff system and the adoption of the conventional tariff 
system practically all over Europe with the exception of France 
and Spain, disregarding certain deviations from either system by 
some minor countries like Norway and Greece. But whether it could 
likewise prove to be best adapted to conditions prevailing in the 
United States depends on whether the factors which determine its 
success in those countries are also present in the United States. 

It is impossible to speak of the advantages or disadvantages of 
the conventional tariff system without comparing it with the French 
or general and minimum tariff system, since under a dual tariff 
system one is the alternative of the other. 

A brief description of the salient features of each will, there- 
fore, be in place. In the conventional system there are two tariffs, 
a general (or autonomous) and a conventional. The former, as the 
name implies, is adopted by the legislative body, and is applied to 
the products of every nation which has no treaty or agreement to 
the contrary. The conventional tariff is made up of the reduced 
rates granted to any of the foreign nations with which reciprocity 
treaties or conventions have been concluded. It is a composite tariif, 
since each nation bargains for reductions on those articles only in 
which it is primarily interested, e. g., in the treaties concluded by 
Germany, Russia naturally secured concessions mainly on agricul- 
tural products ; Austria-Hungary was interested both in agricultural 
and in certain manufactured articles ; Switzerland secured reductions 
of rates on embroideries, laces, certain textiles, wines, cheeses, 
etc. ; Italy, on wines, silk, velvet, etc. ; Belgium, on iron and steel 
products, lace, etc. The combined reductions made up the conven- 
tional tariff; in all cases where the reductions on a certain article 
granted to one nation exceeded the reduction on the same article 



The Conventional Tariff System IC9 

granted to another, the lowest rate granted to one was extended, 
under the operation of the most-favored-nation clause, to every 
nation which had either a reciprocity treaty with Germany or a 
general treaty securing to it most-favored-nation treatment. 

In the French system, consisting of general and minimum 
duties," both tariffs are adopted by the legislature, the minimum 
being applied to foreign nations either as a result of special treaties 
or agreements to that effect, or under the operation of the most- 
favored-nation principle. Under this system the concessions to be 
granted by France are determined by Parliament in advance. 

The chief advantages of the conventional system over the gen- 
eral and minimum w^ere discussed by the writer in the article on the 
'^Double Tariff System," published in The Annals for May, 1907. 
They may be briefly summarized here to preserve continuity of 
argument. They are as follows: 

1. Strategic. Only one set of duties having been adopted, this 
tariff serves as a basis for negotiations without disclosing in advance 
to the other side the extent to which the first nation is willing to 
make concessions. 

2. Elasticity. Representatives of two countries having but one 
tariff each as a basis of reciprocity and with power to make and 
accept concessions which in their judgment seem fair and reciprocal, 
have a better chance to come to an agreement than in the case when 
their hands are tied with a rigid dual tariff, which prescribes for 
each commodity the minimum rate below which they cannot go by 
way of concession, no matter what advantage the other side may 
be willing to offer in return. 

3. Stability. The conventional tariff, as has been pointed out, 
consists of rates agreed upon and fixed by reciprocity treaties drawn 
for a number of years, the period in most of the treaties between 
Germany and other countries being a minimum of twelve years, 
after w^hich the treaties automatically remain in force, unless abro- 
gated by either of the parties. During the time the treaties remain 
in force the rates stipulated therein cannot be raised without the 
consent of the other party. Under the French system the treaties 
merely provide for the application of the minimum tariff without 

^The French system is generally, though erroneously, called "maximum and 
minimum" in this country. While the lower rates are actually minimum, the higher 
are by no means maximum, since the law authorizes the government to raise the 
general rates in case of a tariff war with a foreign country. 

(373) 



no The Annals of the American Academy 

fixing the rates of duty under that tariff. The government is thus 
free to raise the rates at any time during the Hfe of the treaty so 
long as the other party to the treaty is not required to pay a higher 
rate than any other nation. The advocates of the French system 
see in this a great advantage, as it leaves the country free to revise 
its tariff* rates whenever such course may seem advisable in its own 
interests. The adherents of the conventional system, on the other 
hand, believe that stability is of far greater value to the business 
community than freedom to change rates of duty at will. They 
argue that a business man with tariff rates definitely fixed for 
several years to come at home and in the foreign countries with 
which he is doing business, will feel less hesitation in making large 
outlays of capital for manufacturing plants and permanent improve- 
ments, than he would if he knew that his calculations for a profitable 
investment could be upset any day by changes in the tariff at home 
or abroad. Moreover, an increase of the minimum rates by one 
country having reciprocity treaties with other countries w^ould be 
apt to be followed by similar action on the part of the latter in 
retaliation. The knowledge of this possibility would be likely to 
exert a restraining influence upon the country wishing to make 
such changes, and thus the freedom of action may prove to be more 
apparent than real. 

As a practical corroboration of these arguments the experience 
of Germany and France is pointed out. France has been obliged 
to resort to tariff wars in a number of instances on account of the 
rigidity of her tariff system, and in the end was forced to yield on 
the vital point in her policy — the autonomous regulation of her rates, 
by reducing some of her duties below the minimum fixed by Parlia- 
ment. Germany, on the contrary, has been uniformly successful.^ 
Other countries had similar experience, and, therefore, found it more 
advantageous to adopt the German policy. 

But, comparaison nest pas raison, as the French say, and we 
cannot trust to analogy for a conclusive answer to our question. 
It is not so much the intrinsic merits of either system that deter- 
mine its successful working as the conditions under which they 
are respectively applied. A knowlege of the politico-economic 

^Germany, too, has had tariff wars with Russia and Spain ; but in each case 
this was due, again, to the rigidity of the general and minimum tariff systems of 
the latter countries, and Russia, taught by the experience, has since abandoned 
the French system for the German. 

(374) 



The Conventional Tariff System Ill- 

apparatus which enables Germany to use the conventional tariff 
system with such telHng effect is no less essential in forming one's 
judgment as to the merits of the conventional tariff system, than a 
familiarity with the system itself. 

To begin with, Germany has a strong central government, 
whose control over legislation, and especially in initiating legisla- 
tion, is practically as great as that of our standing committees in Con- 
gress. The government controls the appointment of the semi-official 
commission of representatives of the industrial, agricultural and 
commercial interests, which holds hearings and in other ways gathers 
information on which the tariff schedules are based. The tariff 
bill itself is drawn up by the government experts in the various 
executive departments, and is introduced in the Reichstag by the 
government at the time and under conditions which may seem most 
propitious from the government's point of view. While the tariff 
goes through these preparatory stages, the tariff and statistical 
experts in the government departments of the Treasury, Com- 
merce and Foreign Affairs keep in close touch with the work of the 
semi-official commission as well as with the committees in the 
Reichstag. Their intimate knowledge not only of the needs of 
German commerce, but also of the strategic points in the com- 
mercial relations between Germany and the principal competing 
nations is continually drawn upon by the legislators. The taiiff 
schedules are drawn up with infinite care ; there is minute classifica- 
tion of commodities to prevent the inadvertent application of reduced 
rates which may be granted later by Germany to some foreign 
nation on a certain article, to another article imported from a third 
country through lack of sufficient differentiation between com- 
modities in tariff classification. 

After the tariff has been passed by the Reichstag the govern- 
ment appoints a commission, consisting of the department experts 
who have had most to do with the shaping of the tariff bill and who 
are best informed on the subjects to be dealt with in tariff negotia- 
tions with foreign countries. In the tariff negotiations with the 
United States which led to the adoption of the commercial agree- 
ment now In force, Germany was represented by ten experts from 
the following departments: the commercial, political and consular 
divisions of the Foreign Office, the Department of Commerce in 
the Imperial Ministry of the Interior ; the Imperial Treasury Depart- 

(375) 



112 The Annals of the American Academy 

ment; the Prussian Ministry of Finance; Prussian Ministry of 
Agriculture; Prussian Ministry of Commerce. Most of the mem- 
bers of such commissions are picked men, generally economists and 
statisticians, whose regular duties consist in the study of the facts 
underlying the negotiations of tariff treaties. The personnel of the 
commissions, and their preparation for the treaty negotiations are 
matters planned well in advance, usually a matter of years of careful 
work. 

In shaping the general or autonomous tariff the rates are pur- 
posely made higher than is thought actually necessary for purely 
protective purposes, with a view to their subsequent reduction in 
return for concessions from foreign countries. The extent to which 
they will be reduced is never indicated by the government in the 
course of the debates on the tariff in the Reichstag. That is a mat- 
ter to be determined later by another body so far as it can be 
determined in advance of negotiations. 

After the Reichstag has enacted the tariff, there is a second 
unofficial, yet none the less authoritative, parliament which takes 
up the work where the Reichstag has left it. It is the semi-official 
commission of thiry-two representatives of the agricultural, manu- 
facturing and commercial interests to which reference has been 
made before. In preparation for the negotiation of commercial 
treaties the commission holds hearings behind closed doors, at which 
the representatives of different industries present their wishes, their 
needs at home, their grievances abroad ; it formulates definite resolu- 
tions as to the extent to which concessions of rates at home are to 
be made and as to the minimum concessions that are to be accepted 
from the other side. When the treaty is finally negotiated on the 
lines laid down by this secret, semi-official business parHament, its 
opinion must be heard before the treaty is submitted to the Reichstag 
for ratification. 

Such a procedure is not only absent, but could not be thought 
of in the United States. We might improve our equipment by 
strengthening the personnel of some of our government depart- 
ments, by perfecting our methods of tariff-making in Congress, by 
closer co-ordination of the work done in the legislative, executive 
and business spheres. But we neither could nor would introduce 
certain fundamental changes which would be in conflict with the 
spirit of our democratic institutions. 

(376) 



The Conventional Tariff System 113 

Tariff revision in the United States is always preceded by con- 
siderable agitation and public discussion. Public opinion is crystal- 
lized and the members of Congress are expected to act in accord- 
ance with the wishes of their constituents This would be practi- 
cally impossible if we were to adopt the German or conventional 
tariff system, since under that system Congress would have to adopt 
only one set of duties, necessarily higher than those thought desir- 
able, so as to leave ample margin for concessions in negotiating 
commercial treaties. The responsibility of the members of Con- 
gress to their constituents would thus be done away with, and the 
voters would be deprived of whatever direct control they may exer- 
cise now over tariff legislation. These objections would not apply 
to the general and minimum tariff system. To make this perfectly 
clear, let us illustrate the working of the two systems under Ameri- 
can institutions by a concrete example. Let us assume for the 
sake of argument that the people of the United States had come 
to the conclusion that the interests of the country as a whole could 
best be served by a removal of the present duty on pig iron and 
that they elected a majority of the members of Congress pledged 
to that measure. If the United States adopted the French system 
of a general and minimum tariff, Congress would put pig iron on 
the free list under the minimum tariff and might retain the present 
duty on that article in the general tariff, or fix the general duty 
at some other rate. In the negotiations that would later ensue 
with foreign countries, the representatives of the United States 
would be at liberty to concede the free admission of pig iron, the 
one thing left to their discretion being the extent of the reciprocal 
concession to be accepted from the foreign country. 

Under the German plan, Congress would adopt but one tariff 
and would have the alternative of either providing a duty on pig 
Iron, trusting to the executive to remove that duty in the form 
of a concession to a foreign country, or of putting It on the free list 
in deference to the wishes of the people. In the latter case the end 
of the conventional tariff system would be defeated, as we would 
have no concession to offer to foreign countries In return for desired 
tariff reductions on our products In foreign markets. In the former 
case, however, it might easily happen that the will of the country 
would be disregarded, as Its carrying out would be left to the doubt- 
ful exigencies of diplomatic negotiations. 

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114 The Annals of the American Academy 

Negotiations of a tariff treaty being in the nature of a bargain, 
it is natural for either side to assume the attitude of aiming to yield 
as little as possible and to obtain as much as it can. It might easily 
happen that, as a result of "successful" bargaining on the part of the 
delegates of the United States, only a partial reduction of duty 
on pig iron would be agreed upon, and the will of the majority of 
the people would be thus defeated by their own representatives — 
members of Congress and diplomatic delegates — each loyally trying 
to serve the best interests of the country. 

In Germany and in some of the other European countries such 
a thing is less likely to happen, because they have managed to pro- 
vide an extra-constitutional parliament, if it may be so called, 
which takes up the tariff where the Reichstag leaves it. By con- 
fining the Reichstag to the enactment of the general tariff only 
and leaving the control over the ultimate shaping of the conven- 
tional tariff to the Tariff Commission, the Germans have managed 
to secure all the advantages of the two dual tariff' systems without 
incurring the disadvantages of either. The foreign nations with 
whom treaties are negotiated are left in the dark until the last 
moment as to the length Germany is ready to go in making 
concessions, so the strategic advantage of keeping one's cards to 
himself is retained to the end. At the same time the control of the 
people over the minimum rates, which is the chief advantage of the 
French system, is secured in Germany through the Tariff Commis- 
sion, which consists of the representatives of all the economic inter- 
ests of the country, save labor, whose interests, however, as pro- 
ducers are in that instance coincident with those of the manufac- 
turers and as consumers with those of the commercial bodies. 

As in Germany, so in the United States, reciprocal treaties 
affecting tariff rates would have to be submitted to Congress for 
ratification before they could become the law of the land. But in 
this respect also the difference of procedure is so striking as to 
seriously influence the efficiency of the same system in the two 
countries, and therefore deserves close study. 

In Germany the treaty having gone through the preliminary 
stages described here, its ratification by the Reichstag is a foregone 
conclusion. There may be opposition to it from dissatisfied parties, 
but once the approval of a majority of the semi-official tariff com- 
mission has been secured, its ratification by the Reichstag is assured. 

■ (378) 



The Coui'cntioiial Tariff System 115 

Of the numerous commercial treaties negotiated by the German 
government since the foundation of the empire, not one has ever 
failed of ratification in the Reichstag. This is not surprising if 
we consider that in Germany there is only one legislative chamber, 
that a simple majority of the votes cast is sufficient for the ratifica- 
tion of a treaty, and that such a thing as putting a treaty concluded 
by the government to sleep in the pigeon holes of a committee room 
is a thing unknown there. 

Turning to the United States, we find a great contrast. If we 
adopted the conventional tariff system, the reciprocity treaties would 
have to be approved not only by the Senate but by the House, since 
they would contain new tariff rates which only the lower House has 
the power to initiate under the constitution. As the negotiation 
of a series of important treaties would be likely to consume consid- 
erable time, it could easily happen that by the time they reached 
Congress a new House might be elected to succeed the one which 
had enacted the general tariff. The latter being out of the way, the 
tariff' issue would in all probability no longer figure as a political 
question, and the newly elected House would not, therefore, neces- 
sarily be bound by the tariff pledges which the constituents exacted 
from its predecessor. The reduced rates agreed upon in the treaties 
would virtually amount to a revision downward of a tariff but 
recently enacted, and its fate would be by no means certain. It 
would be a comparatively easy matter for a few congressmen repre- 
senting different constituencies, standing together, to secure amend- 
ments to a number of rates ; yet this would be tantamount to a rejec- 
tion of the treaty, since it would require the reopening of negotia- 
tions with the foreign nations and a resubmittal of the newly con- 
cluded treaties to the parliaments of the respective countries. 

Assuming that the treaty has successfully withstood the scrutiny 
and attacks of those who were hostile to it in the House, it would 
still be far from the goal, since under the constitution a treaty must 
receive two-thirds of the votes cast in the Senate in order to be 
ratified. It would therefore be easy for a determined minority of 
the Senate to defeat the treaty. 

Under the general and minimum tariff system these difficulties 
would be greatly reduced. If not entirely eliminated. Congress hav- 
ing adopted a dual tariff* In the first instance, the treaties negotiated 
would contain no new rates, and, therefore, would not require action 

(379) 



Ii6 The Annals of the American Academy 

by the House. In the Senate, too, it would be easier to secure favor- 
able action, since our own rates having been passed upon by Con- 
gress before, the only question to consider would be the concessions 
secured from the foreign countries. In view, however, of the prece- 
dent already established by Congress in connection with the 
McKinley tariff and followed in the Dingley tariff, it is conceivable 
that Congress might dispense with the submission of the treaties 
to the Senate. Under the Dingley tariff at present in force the 
President is authorized to conclude agreements with foreign 
countries by granting reduced rates on a small number of articles 
(brandies, wines, wine-lees, paintings and statuary)^ and to put 
them in effect without ratification by the Senate. Under this 
authority a number of commercial agreements have been concluded 
in the past ten years, and are still in effect without having been 
submitted for approval to the Senate. In conferring this authority 
upon the President, Congress has not parted with its rate-making 
power, since the reduced rates, to be subsequently granted to foreign 
nations on a reciprocal basis, are definitely fixed in the act. The 
same measure of authority could be conferred upon the executive 
under the proposed dual tariff system by authorizing the President 
to negotiate reciprocity treaties on the basis of reductions of duty 
not to exceed the limit set by the minimum tariff. This would insure 
the prompt application of the minimum tariff upon the conclusion 
of the negotiations of the reciprocal treaties. 

Another serious difficulty would be encountered under the con- 
ventional tariff system in the United States through the application 
of the most-favored-nation principle to our relations with foreign 
countries. The most-£avored-nation clause as interpreted and 
applied by European nations forms part and parcel of the conven- 
tional tariff system. It frequently happens that in negotiating a 
series of treaties w^ith foreign nations, different rates will be agreed 
upon on the same products. In all those cases the countries which 
had accepted the higher rates get the benefit of the further conces- 
sions granted to some other nation without being required to off'er 
additional concessions in return. In this manner all nations which 
have negotiated tariff treaties are treated on the same "most- favored- 
nation" footing, no matter what the original terms of the respective 
treaties were. This makes the operation of the conventional tariff 
system simple and fair. 

(380) 



The Conventional Tariff System 117 

Under what is known as the American interpretation of the 
most-favored-nation clause, however, such a procedure would be 
impossible. It has been the policy of the United States* not to 
extend gratis to other nations concessions which are made to a 
foreign country in return for reciprocal advantages. Under this 
construction of the most-favoredrnation clause, which narrows down 
its application only to gratuitous concessions granted to some foreign 
country, the conventional tariff system would become very unwieldly 
and complex. To illustrate: If in negotiating a treaty with France 
we granted a 20 per cent reduction of duty on gloves, and in a treaty 
subsequently concluded w^th Germany the reductions were made 30 
per cent, we would have three different rates on the same article 
(the general rate, the rate to France, and the rate to Germany), and 
it might easily happen that on some articles we would have as many 
rates of duty as there were treaties concluded. In the case cited 
here as an illustration, France would find herself discriminated 
against unless we extended to her gloves the reduction granted to 
Germany. Under our interpretation of the most-favored-nation 
clause, however, we could not agree to that without reopening 
negotiations with France for additional concessions to compensate 
the United States for the reduced duty on gloves. This would be 
manifestly impracticable, as no nation would care to negotiate 
reciprocity treaties with the United States if it could not be assured 
in advance against unexpected discriminations as a result of sub- 
sequent reductions of duty by the United States in favor of other 
countries. To give them that assurance (which constitutes the 
underlying basis of all the tariff treaties in force among European 
nations) w^e would have to depart from the interpretation of the 
most-favored-nation clause hitherto adhered to by the United States. 
The only alternative would lie in the adoption of the general and 
minimum tariff system in which the minimum rates can be made 
uniform to all reciprocating nations by an act of Congress, 

Conchiston 

Summing the conclusions reached by the analysis of the two 
dual tariff systems, it can be said that the conventional system 
offers the facilities of superior strategic advantages in negotiating 

*This policy has been more fully discussed by the writer in the North American 
Eeview for March, 1906. 

{381) 



ii8 The Annals of the American Academy 

reciprocity treaties, flexibility in mutual rate adjustment, and sta- 
bility of rates during the life of the treaty. It requires, however, 
for its successful application the existence of an organization which 
combines in itself the representative character of a legislative body 
with the most intimate knowledge of things that com_es to a board of 
experts, which can carry on its deliberations in executive session 
while enjoying the confidence of the people and speaking with an 
authoritative voice in the councils of the government. 

It is most successful in countries in which the executive and 
the legislature are under one control, either because the majority 
of the legislative branch controls the executive, as in countries hav- 
ing a constitution like that of England or France, or because the 
executive controls the legislature more or less, as in Russia and 
Germany. It can be made to yield brilliant results where the forms 
of government and the administrative apparatus allow of a careful 
planning of a commercial policy, applied with deliberate precision 
and continuity of purpose, which comes of a stable administrative 
system undisturbed by political changes. 

Finally, the conventional tariff system, to be practical and 
acceptable to the foreign nations as well as to the one which adopts 
it, must have as its underlying basis the unlimited application of the 
most-favored-nation principle, as understood and enforced among 
all the great commercial nations of the world, except the United 
States. 



:(382) 



THE AMERICAN INTERPRETATION OF THE "MOST 
FAVORED NATION" CLAUSE 



By Chester Lloyd Jones,, Ph.D., 
Instructor in Political Science, University of Pennsylvania, Philadelphia. 



The navigation legislation of the United States has been of 
varied and apparently contradictory character. Often, however, 
the laws passed have been inconsistent only in effect while prompted 
by the same general motives. A large portion of our early legisla- 
tion as to tonnage dues, for example, was passed not to further the 
development of the American marine alone, nor to furnish revenue 
for the government, but with the object of forcing other countries 
to grant fair conditions of commerce. Our earliest agreements with 
foreign nations show a desire to give and accord the most Hberal 
terms for international trade. Shortly after the ratification of 
the constitution, however, a severe policy of discrimination against 
foreign shipping was adopted resulting in the series of ''countervail- 
ing" tonnage laws by which England and the United States piled 
restriction after restriction on colonial commerce, one aiming to 
force the other to open its West Indian markets, the other striving 
to keep all the trade under its antiquated system of navigation laws. 
All this was an attempt to force what we considered fair conditions 
of trade — an attempt wholly opposed in its effect to the general 
result which the United States sought to secure, the establishment 
of a free field for competition in the colonial markets. With the 
second third of the nineteenth century a more liberal policy saw 
the abolition of many of the navigation restrictions, and until the 
Civil War brought the re-enactment of tonnage diies there was a 
period in which comparatively little discriminatory tonnage legisla- 
tion was passed. The necessity of an increased income during the 
Civil War brought the renewed levy of tonnage duties which, 
through a combination of reasons, continue even to-day, as will be 
shown. 

Our commercial legislation, except as discriminations have been 

(383) 



120 The Annals of the American Academy 

made to favor our own merchants^ has been uniformly in support 
of equal terms to all nations. There has been no granting of special 
unrequited advantages in trade to certain nations. We have endeav- 
ored to grant and secure equal opportunity in all markets to all 
nations. 

Most favored nation agreements have been a factor in the treaty 
making of the United States from the beginning of our international 
relations. The very first of our commercial treaties, that of 1778, 
with France, though falling short of obtaining the unrestricted 
trade arrangements for which the negotiators argued, secured at least 
the guarantee that there should be no discrimination in French 
ports against the products of the United States as contrasted with 
other countries. The principle thus early introduced appears fre- 
quently in our subsequent treaties, and with us as with nations in 
general has become from the '70's on^ a regular feature of inter- 
national conventions. 

Of late years our efforts to establish equal opportunity in inter- 
national commerce have extended beyond the scope of treaty-making 
in the narrow sense. Our stand for the open door in the Far East 
is in fact but another manifestation of the same policy. It is the 
attempt to assure not only fair conditions in trade with the powers 
with whom we have direct treaty relations, but to guarantee that 
none of the great powers shall by agreements with the weaker 
nations of the Orient obtain any right which shall be prejudicial 
to the commercial interests of other nations similarly situated. The 
part the United States has played in the world politics of the Far 
East has been controlled by the old desire to prevent the monopoli- 
zation of the trade of certain districts — to prevent a recrudescence 
of commercial policies similar to those which flourished in the eight- 
eenth century and which the first half of the nineteenth century 
outgrew. 

This policy of equal opportunity for all does not attempt in 
the least to limit the right of each nation to determine for itself 
its own fiscal policy, indeed, especially as it shows itself in the Far 
East it works rather to guarantee to each nation the freedom to 
discriminate against foreigners. The end sought is rather to assure 
that to single nations no advantage shall be granted which shall 
not be granted to other nations upon the grant of equivalent favors. 
The "most favored nation" principle, in other words, does not at 

(384) 



Interpretation of the ''Most Favored Nation" Clause 121 

all interfere with the reciprocity agreements. It allows the nations 
to contract for mutual concessions with as much freedom as ever. 

Interpretation of the Clause in Reciprocity Treaties 

In spite of the apparent simplicity of this principle, conflict has 
repeatedly arisen as to the proper interpretation of the ''most 
favored nation" guarantees. The point which is the subject of con- 
tention usually narrows down to this : When nation A grants special 
terms to nation B as to the importation of certain articles in return 
for concessions by nation B on certain points, does that give all 
other nations with the "most favored nation" clause in their treaties 
the right to demand the same concessions upon their declaring their 
willingness to yield the same points yielded to nation B. Is it permis- 
sible, on the other hand, to maintain that the grant to nation B for 
the return of special concessions gives the other nations only the 
right to demand a similar grant when they have themselves 'made 
concessions which the treaty-making power of nation A shall con- 
sider the equivalent of those made by nation B? Suppose, for ex- 
ample, that the United States should grant specially low duties 
on French dry-goods in return for low duties on American agricul- 
tural machinery. Is it open to Germany to demand the same terms 
for her dry-goods under her "most favored nation" treaty upon 
the tender of the same terms on imports of American agricul- 
tural machinery, or may the United States contend that the 
grant of low duties to German dry-goods would be more than 
an equivalent return, and would therefore place Germany not on the 
general basis of the most favored nation (presumably in this case, 
France), but would make her an especially favored nation, thus, in 
fact, violating the very principle which the "most favored nation" 
clause was intended to guarantee? In other words, are recipro- 
city agreements to be considered as automatically extending to all 
nations with "most favored nation" clauses in their treaties, or must 
each be the subject of a special negotiation, a special bargain 
between the countries involved, except where the favors are freely 
granted ? 

In this controversy practically all the important nations of 
Europe have adopted the first view, the United States has from the 
beginning contended for the second in spite of the apparently con- 

(385) 



122 The Annals of the American Academy 

tradictory language of many of its treaties. The most important 
country which stands with the United States on this point is Japan. 

The American Position 

Though the conflict as to the interpretation of the meaning of 
the "most favored nation" clause did not arise in the United States 
till almost thirty years later, and then in connection with a subse- 
quent treaty, the commercial treaty of 1788 with France states 
what has been the consistent American understanding. It declares 
that ''the most Christian King and the United States engage mutu- 
ally not to grant any particular favor to other nations in respect of 
commerce and navigation which shall not immediately become 
common to the other party who shall enjoy the same favor freely 
if the concession was freely made, or on allowing the same com- 
pensation if the concession was conditional." The words ''same 
compensation," or the similar phrases which take their place in other 
treaties have been consistently interpreted by our government to 
mean "same in amount," or "equivalent," not "concessions on the 
same classes of articles." 

What is the character of the concessions which will be con- 
sidered an equivalent is to be left entirely to the treaty-making 
powers of the respective states. The mutual concessions are "to be 
honorably determined by the governments concerned." In binding 
itself to grant the "most favored nation" treatment a government 
does not bind itself to any definite program. It only pledges its 
honor that it will not adopt a conscious policy of discrimination. 
Special privileges in relation to customs on certain articles may be 
given, or the use of a port as a coaling station, the grant of a pro- 
tectorate, in fact, anything within the scope of the treaty -making 
power may be the subject of the concession, and such special 
privilege granted for a special return is not to be considered as a 
discrimination which would justify other powers in complaining. 
They may not enjoy as a right or for a lesser payment a privilege 
for which other countries have given a valuable equivalent. 

This uniform holding by the executive departments was further 
strengthened by a decision of the Supreme Court in 1887. The 
question involved was whether Denmark, under its "most favored 
nation" treaty with the United States, could claim that sugar from 
the Danish Island o£ St. Croix should be admitted to the United 

.(386) 



Interpretation of the ''Most Favored Nation" Clause 123 

States free of duty because a recent treaty had granted that privi- 
lege to Hawaiian sugar. The decision of the court is given as 
follows : 

''Our conclusion is that the treaty with Denmark does not bind 
the United States to extend to that country without compensation 
privileges which they have conceded to the Hawaiian Islands in 
exchange for valuable concessions."^ 

The last important statements concerning the meaning of this 
clause in its application to reciprocity treaties were made in the 
discussions arising under the Dingley Tariff Act of 1897. In ex- 
plaining the position of the United States, Secretary Sherman, in a 
letter to Mr. Buchanan, Minister of the United States to Argentina, 
stated : 

*Tt is clearly evident that the object sought in all the varying 
forms of expression is equality of international treatment, protec- 
tion against the wilful preference of the commercial interests of 
one nation over another. But the allowance of the same privileges 
and the same sacrifice of revenue duties to a nation which makes no 
compensation that had been conceded to another nation for an 
adequate compensation instead of maintaining destroys that equality, 
which the 'most favored nation' clause was intended to secure. It 
concedes for nothing to one friendly nation that which the other gets 
only for a price." . . . "The right of the other nations to enjoy 
the same special concessions depends on their ability to offer an 
equivalent compensation. When they do this the 'favored nation 
clause' is rightly invoked."- Even when the second nation offers 
the same nominal concessions as given by the first it cannot secure 
identical treatment under the clause unless the treaty-making power 
considers the second sacrifice actually equal to the first. 

This ground was further emphasized in the subsequent negotia- 
tions with Switzerland, Germany and other European powers. 
Under the authority of the Dingley act a reciprocity agreement 
between the United States and France was negotiated on May 30, 
1898. On June 29th, Mr. Pioda, the Swiss minister at Washington, 
demanded that the same privileges be extended to Swiss products, 
on the ground that the terms of the Swiss treaty of 1850 expressly 

^Bertram et al. vs. Robertson, Collectors of the Port of New York, U. S. Sup. 
Ct. Report, Vol. 122. 

2Moore, International Law Digest, Vol. V, pages 277-83. 

(387) 



«. 124 The Annals of the American Academy 

covered the case. Article IX of that treaty stated that neither 
party should ''impose any higher . . . duties upon . . . 
the . . . products of the other . . . than shall be payable 
upon the like articles being the produce of any other country." 

It was found upon examining the correspondence attending the 
negotiation of the Swiss treaty that a consideration of the intent 
of the negotiators required that the United States adopt the Swiss 
view as to its meaning. At the same time the statement was made 
that the Swiss agreement must be considered "as henceforth consti- 
tuting an exception to the otherwise uniform policy of the United 
States." The customs officials were therefore instructed to grant the 
same terms to Swiss products that had been granted to those of 
France. The United States insisted, however, that it might prove 
necessary for her to denounce the treaty under which she was 
obliged to adopt this agreement, since it was clearly in opposition to 
our well-established practice. 

This yielding to the Swiss claims was at once followed by 
claims from other governments that they should be granted the 
same privilege which had been gratuitously granted to Switzerland. 
To accede to these requests would be equivalent to giving freely to 
all nations the concessions made to France. To avoid this conse- 
quence, notice was given to Switzerland that the United States 
would terminate its convention of 1850 so far as the articles in 
question were concerned at the end of one year. The denouncement 
of the articles finally took effect March 23, 1900. 

The same French agreement which had brought this complica- 
tion with Switzerland aroused the Germans to insist that they must 
be put upon the same basis by virtue of the treaty of the United 
States with Prussia of the date of 1828. Investigation of the terms 
of the convention showed, however, that Germany's grievances were 
based only upon the prevailing difference of opinion as to the applica- 
tion of the "most favored nation" clause to reciprocity treaties, and 
the claim was disallowed. 

Application of the Clause to Laws of Congress 

Besides the application of the "most favored nation" clause to 
treaties there are two other general classes of cases in which it 
has been invoked. These involve the application of our laws of 

(388) 



Interpretation of the "Most Favored Xation^' Clause 125 

Congress to foreign trade. They may be grouped under : ( i ) geo- 
graphical discriminations, and (2) retahatory discriminations. 

Geographical Discriminations. — On June 26, 1884, an act went 
into force "to remove certain burdens on the American merchant 
marine, and encourage the American foreign carrying trade." Sec- 
tion fourteen of this law provided a modification of the tonnage 
duties which had been re-enacted at the time of the Civil War. It 
granted to vessels entering the ports of the United States from ports 
of Central and South America a tonnage reduction of one-half of 
the amount charged other ships. Each such vessel was to pay three 
cents per ton — not to exceed fifteen cents in any one year, instead of 
six cents — not to exceed thirty cents in any one year, the rate charged 
to others. Belgium, Denmark, Germany, Italy, Portugal;, Sweden 
and Norway protested against the enforcement of this law on the 
ground that it violated their treaty rights. The argument pre- 
sented by Germany is fairly typical of the others. It was maintained 
that the answer made by the United States that the discrimination 
was purely geographical in character was unsatisfactory. If this 
principle was admitted it might make all "most favored nation" 
guarantees of no value. Geographical discrimination might be 
used to the extent of excluding — for example — all but Germany. 
Even if such exceptional laws could be justified in certain restricted 
cases where the countries were contiguous they could not be so when 
countries at a distance were involved. In efifect, if not in wording, 
the act, it was claimed, violated the treaty agreements. 

In 1886, with the protests still unsatisfied, another act was 
passed authorizing the President to extend the favorable tonnage 
regulations to all parts of South America. In addition the Presi- 
dent was authorized to extend similar privileges to any other country 
upon the assurance that no higher duties w^ere charged American 
vessels in the ports of such country. To this interpretation Ger- 
many again objected, because not only was the act of 1884 not re- 
pealed, but was extended to include South America. 

"The original attitude assumed by the German government 
towards the old law has been in no wise changed by the new 
act. ... As long as vessels from the ports of North and 
Central America pay but one-half of the tonnage duty that is 
levied upon vessels from German ports without being required 
to furnish proof that less than six cents is exacted from American 

(389) 



126 The Annals of the American Academy 

vessels in their ports, the imperial government will he obliged to 
maintain its claim for similar usage.^ 

The United States has not seen fit to modify its holdings as to 
its right to make geographical discriminations. Our policy is to 
abolish tonnage duties as against countries which do the same for 
us. In but few countries, however, is there an absence of tonnage 
duties of some sort, and consequently the law has had a negligible 
eflfect in practice. 

Retaliatory Discriminations. Clauses providing for retaliations 
against unfair trade conditions introduced by other countries are 
to be found in the ]\IcKinley act of October i, 1890, the tariff act 
of August 28, 1894, and the act of July 24, 1897. In all these cases 
the interpretation of the "most favored nation" clause has been 
involved. 

Under the McKinley act it w^as provided that when the Presi- 
dent should be satisfied that any country producing and exporting 
sugars, molasses, coffee, tea and hides, or any of such articles im- 
posed duties on the products of the United States which were 
unfair in view of the free importation into the United States of the 
enumerated articles, he should suspend such free importation and 
place upon the articles certain duties. Under this power a proclama- 
tion was issued March 15, 1892, imposing duties on the specified 
articles when imported from Colombia. Colombia protested to the 
United States, but it was maintained that the law was no violation 
of the "most favored nation" guarantee since it applied "the same 
treatment to all countries whose tariffs are found by the President to 
be unequal and unreasonable." 

One of the most interesting phases of the discussion of the 
"most favored nation" clause is that raised by the payment of boun- 
ties for exportation. AVhere a bounty is paid for the exportation of 
certain domestic products does that introduce a discrimination in 
trade which a foreign country may counteract by increasing its 
tariff on bounty-fed imports and still hold that it has not violated 
the "most favored nation" guarantee ? As to this class of discrimi- 
nations the division of authority is different from that as to the 
application of the clause to reciprocity treaties. England and the 
United States are the leading advocates supporting such retaliatory 

'Report of Mr. Bayard. Secretary of State, to the President, Jan. 14, 1889, 
H. Ex. Doc. 74, 50th Congress, 2d session. 

(390) 



Interpretation of the ''Most Favored Nation' Clause 127 

legislation. Russia, Germany, Austria-Hungary and the continental 
countries in general, stand opposed. This question has arisen under 
the tariff act of August 28, 1894, and the act of July 24, 1897. 
Against the first act the German ambassador protested October 12, 
1894, claiming that the German export tax on sugar which the act in 
effect counteracted by the levy of an additional duty of one-tenth 
of a cent a pound, was a domestic measure purely, and therefore 
outside the consideration of the United States. To enforce the law 
would, he said, deny to Germany the "most favored nation" treat- 
ment. In this contention Mr. Gresham, the then Secretary of State, 
was disposed to agree.* Mr. Olney, who succeeded to the position 
in the following month, November, took the opposite view, holding 
that ''the export sugar bounty of one country might be counteracted 
by the import sugar bounty of another without causing any dis- 
crimination which could be deemed a violation of the *most favored 
nation' clause."^ 

This is the position finally assumed by the United States. The 
act of July 24, 1897, further extended this principle by providing 
that any sugar imported from a country remitting the tax usually 
levied on all exported sugar, should be liable to an increased duty 
to the full amount of the refunded tax. Such repayment of taxes is, 
the courts have decided, only a disguised form of bounty.^ 

From what has preceded it is clearly seen that the "most 
favored nation" principle, as interpreted by the United States, has 
often been fruitful of misunderstanding if not of ill-will on the part 
of European countries. The treaty-making power of the United 
States, indeed, has often had to bear harsh criticism by foreign 
public opinion on other accounts also. In countries whose foreign 
offices can, by their own acts, bind the governments to treaty pro- 
visions without the concurrence of any other body, a constitutional 
requirement that after negotiation all treaties must be reviewed by 
the upper branch of the legislature is not easily understood. The 
part of the Senate in our foreign relations has not, indeed, been 
without serious criticism from many even in our own country. On 
the one hand it is asserted our government reserves to itself the 
privilege of retreating from a bad bargain, or one which does not 

^Foreign Relations, 1894, 236. 

621 Op. Atty. Gen, 80-82. 

•Downs vs. United States (1008), 187 F. S. 496. 

(391) 



128 The Annals of the American Academy 

meet popular favor after the other party to the agreement has 
practically bound itself to all the treaty provisions — only the formal 
exchange of ratifications being left to be accomplished. This, it is 
claimed, introduces an unequal element into the negotiations. 

On the other hand, it is argued that reference to the Senate 
denies mobility to our treaty-making machinery. The necessity 
of review by this body, with the attendant clash of party interests 
and the ever-present possibility of filibustering, surrounds the nego- 
tiations with so many possibilities of defeat that our government 
is at a distinct disadvantage in comparison with others. 

The "most favored nation" clause as an element in our treaties 
has in the same way been a subject of criticism. Like the treaty- 
making power in general, it has often provoked resentment in 
foreign courts. This is due to no lack of consistency on the part 
of our government, but to a non-appreciation of the extent to which 
the United States intends to bind itself in the negotiations in 
question. 

The Advantage of the American Interpretation. 

The meaning of the clause has the distinct gain of giving 
flexibility in one respect in spite of our cumbersome treaty-making 
machinery. When the government in designing reciprocity, agree- 
ments or commercial legislation can act with the assurance that the 
measure will apply only to that portion of our foreign trade which 
it is intended to affect, it is much easier to fit the legislation to 
needs than it is when it must constantly be borne in mind that the 
identical concessions may be claimed by other countries to which 
they were not intended to apply. The complexity of modern trade 
relations makes the application of an invariable rule often a means 
of introducing rather than eliminating discriminations. Indeed, in 
many cases a reciprocity treaty might provide for mutual conces- 
sions which, while not amounting to discrimination such as would 
violate the most favored nation principle, would be entirely destroyed 
in value were similar rights granted to others. 

Take for example the Hawaiian treaty of 1875, i^^ which, 
among other things, it was agreed that that government should not 
during the life of the treaty lease any port, harbor or territory to 
any other power, or allow any other nation to obtain the privileges 
in customs duties which were granted to the United States. In 

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Interpretation of the "Most Favored Xation" Clause 129 

return the United States granted certain commercial privileges to 
Hawaii. This agreement, the United States could maintain under 
its interpretation, was no violation of the most favored nation 
guarantee but was an adjustment which, though it gave exclusive 
privileges, was one which was justified by our peculiar relation to 
the islands. If the European interpretation of the clause had been 
strictly applied, it would have necessitated the disregard of all the 
local conditions which counseled special arrangements, with the 
result that the advantages which each of the powers sought by the 
agreement would have been minimized, if not destroyed. 

A similar illustration is afiforded by the Cuban reciprocity 
treaty of 1903, granting to Cuban sugar a reduction of tw^enty per 
cent of the usual tariff in return for other concessions by Cuba. 
Cuba, it was further agreed, should continue during the life of the 
treaty to be the only country to whose sugar this advantage should 
be given. The peculiar political relations of the tw^o countries, the 
United States held, justified its making such an agreement, notwith- 
standing its treaty guarantees to other nations. Not to allow the 
treaty-making power this freedom of action would indeed often 
hamper, if not destroy, its power to make the agreements demanded 
by actual conditions. 

As applied both to treaty-making and legislation in general, 
the interpretation of the "most favored nation" clause adopted by 
the United States has the decided advantages of flexibility and 
certainty. It allows the adjustment of relations to varying condi- 
tions and thus avoids the adoption of uniform rules which in many 
cases would in fact amount to discrimination. It also avoids the 
uncertainty on the part of legislators and the courts which must 
of necessity be present when, due to the interlocking of the pro- 
visions of various treaties, it is not clear to what body of facts any 
law or treaty may apply. 



(393) 



THE MAXIMUM AND MINIMUM TARIFF 



By John Franklin Crowell, Ph.D., 
"The Wall Street Journal," New York City. 



The declarations of the National Republican platform in favor 
of the maximum and minimum tariff to supersede the existing 
general tariff is pretty sure proof that, if the present administration 
be returned to power in the coming elections, revision will be made 
in keeping with the policy thus outlined. In the platform statement 
the minimum tariff is proposed as the normal and the maximum as 
the means of forcing more favorable terms upon nations whose 
tariffs discriminate against American goods. Presumably the 
standard of equal treatment is still to be found in the most-favored 
nation basis. 

If the government actually carries out this program, it will 
mean that the United States is taking counsel in her tariff develop- 
ments from her own imitators who have meanwhile gone much 
farther in the use of the tariff as an offensive and defensive instru- 
ment of trade. Our protective tariff which continental Europe 
first copied has in their hands been developed from a mere defensive 
measure to an offensive weapon. But in applying our protective 
tariff they discovered that the self-sufficiency of our natural 
resources and home market was lacking in their case. Hence the 
necessity of so developing their tariffs as to favor the imports of 
raw materials and to force open foreign markets for their manu- 
factures. As the industrial development of the United States ad- 
vanced, some such tariff reconstruction has become inevitable here. 
How is this program likely to work, as applied to the United 
States? That will depend much on the skill, "technical intelligence 
and commercial foresight with which the proposed maximum and 
minimum tariff is constructed. The construction of the schedules 
in turn will depend largely on the proportionate weight allowed to 
expert judgment, producing interests and the consuming public in 
dictating rates of import duties. Our existing tariff favors the 
producing interests most and the consuming interests least. 
Although constructed with skill, it lacks that capacity to encourage 

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The Maximum and Minimum Tariff. 131 

foreign trade by being adjustable to conditions within limits pre- 
scribed in the schedule. 

An approach to this adjustability was made in our reciprocity 
treaties and in the surtax on imports of bounty-fed sugar. Neither 
of them worked satisfactorily, probably because of the quite limited 
scope of their application. The reciprocity treaty with Canada 
worked against our interests. That with Spain (Cuba) worked in 
our favor. But the net outcome of the surtax war with Russia 
probably did the United States more harm in the exclusion of our 
manufactures by the maximum tariff imposed by Russia than our 
excess tax on sugar did to Russia. 

Assuming that our maximum and minimum tariff schedules are 
to be constructed with as much insight and foresight as the French 
or the German tariffs, having thoroughly considered both trade 
relations and the treaties arising out of the new schedule, then the 
result will depend on the skill with which the treaties are negotiated 
and the system applied. If applied by a permanent commission 
composed of competent experts, not exclusively given to questions 
of customs administration, but quite as much to mastering the more 
general problems of our foreign trade, then there may be found in 
this system of tariffs the key to the baffling situation from which 
American foreign trade must sooner or later extricate itself. 

If these requirements of a scientifically constructed and com- 
petently administered tariff are not met in some reasonable measure 
in the proposed maximum and minimum schedules, then the instru- 
ment which has proved so effective elsewhere may, for lack of 
these essentials, prove to be a bungling machine in the hands of 
those who have not yet risen to the height of its mastery. The 
first problem is to construct the right kind of a mechanism. The 
next one is to see that it does not work to the detriment of the 
domestic good, nor to the defeat of the desire for an expanding 
international trade. 

Such an instrument the French statesmen intended to contract 
in their maximum and minimum tariff' of 1892. They succeeded 
finally In accomplishing the two main objects — to give greater 
security and encouragement to domestic production, and to obtain 
readier access to foreign markets. The difference between minimum 
and maximum rates Indicated the measure of concessions France 
was prepared to make for admission of her products to outside 

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132 The Annals of the American Academy 

markets. The maximum tariff was in force except wherever by 
agreement to favor French imports the minimum rate was granted. 
On cattle and meats, for instance, in which the United States was 
greatly interested, the tariff of 1892 had only one schedule. But 
ten years later, after it was seen that even Germany could import 
meats profitably over the rate of $1.93 per kilo, the minimum rate 
on cattle was doubled and the maximum trebled. The rates on 
meats were advanced as below: 

Tariff of 1892. Tariff of 1902-03, 

Max. Min. Max. Min. 

Cattle $1.93 $1.93 $5.79 $3.86 

Mutton 6.17 6.17 9.63 6.7s 

Pork 2.32 2.22 y.72 5.40 

Beef 4.82 4.82 9.65 6.75 

Salt meats 4.82 4.82 9.65 5.79 

This table illustrates the extent to which the tariffs were applied 
in the effort to preserve the entire domestic trade. At all hazards 
the home market was to be reserved in full. To that end the 
schedules were kept in the control of the legislature rather than 
entrusted to the treaty-making powers, whose range of concessions 
was defined by the two extremes of the schedule. By this method 
any unfavorable developments in trade movements could be dealt 
with from year to year. The tariff war with Switzerland, which 
would not accept even the French minimum as the equivalent of 
Swiss rates on French goods, lasted only seven months (1895^ — 
long enough to result in France's giving Switzerland lower than 
minimum rates on twenty-nine commodities. (Ashley, Modern 
Tariff History, Ch. VI.) Thus out of the double schedule developed 
a sub-minimum schedule, as with Spain and Switzerland, and by 
Article IV of the Meline law an ultra-maximum or commercial war 
tariff was provided for. Consequently the so-called maximum and 
minimum tariff has by this time evolved into a fourfold schedule, 
any one or all of w^hich may be changed at any session oi the 
legislature, to say nothing of treaty changes or the varying inter- 
pretations of the tariff administration. This gives great Instability 
to Imports. The burden of the French system Is defensive to the 
extent of prohibition of foreign competition. A secondary consid- 
eration Is the expansion of exports. With the German tariff policy 
the former Is assumed as secure and the latter is the main purpose. 

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The Maximum and Minimum Tariff. 133 

This difference is significant of the tariff methods of the two 
nations. 

This was only one side of the workings of the French system. 
The natural effort to escape the burdens of maximum rates is seen 
in the fact that within a year or two eighteen different countries, 
by treaty or convention, became entitled to the minimum tariff. 
Within the scheduled limits of double tariffs there are always wide 
possibilities of negotiation. Germany, seeing this opportunity, and 
fearing to hazard her export trade to legislation, threw the weight 
of her efforts into commercial treaties, by which, in the negotia- 
tions of 1890-92, a ten-year freedom from charge was, as a rule, 
secured, and a definite basis found for pushing her export interests. 

Of the two nations, France and Germany, both have the double 
tariff, but the former has contrived her system to admit of readjust- 
ment in administration, thus retaining a large element of uncertainty 
in its working in trade, while Germany has largely eliminated this 
by the specific terms of commercial treaties. The years 1903-04 
marked the end of the old and the beginning of the new tariff policy 
of Germany. The highly specialized tariff aimed at two objects, to 
place higher duties on all manufactures which had hitherto been 
imported in greater value than Germany exported, and to secure 
more favorable trade treaties in the place of the Caprivi treaties as 
their limit expired. (Review of World's Commerce, Washington, 
1904, p. y2.) 

On this basis Germany's foreign trade is now advancing, and 
apparently with increasing confidence toward the future. The 
French tariff has given a high measure of self-preservation to 
domestic industries in agriculture and manufacturing. But it has 
not really secured that degree of expansion in foreign trade which 
was anticipated. This is due only in part to the indefiniteness of 
her general treaties, but also in part to the character of her exports 
which go mainly to the well-developed nations, as compared with 
Germany, whose treaties with the smaller nations of Europe have 
given her special advantages. 

The United States have now before them two historic experi- 
ments in tariffs based on the ideas of protection to home industries 
and exportation of a growing industrial surplus. Which of the 
two is better adapted to our purposes? The answer would seem to 
be this: That until the United States becomes fully enough aware 

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134 The Annals of the American Academy 

of the necessity for its manufactures to open and maintain foreign 
markets as a permanent part of national policy, the methods in- 
volved in the French system may be quite adequate for most of our 
needs. But once the industrial interests of the nation get a fore- 
taste of the possibilities of a truly world market, we will have to 
resort to the much more specific and systematic methods of Ger- 
many. In fact, the more highly developed exporting industries, like 
the implement industries, the steel industries and the provision in- 
dustries can even now have no other vital interest in the tariff than 
this one, by which their particular products may be given favorable 
treatment by foreign nations in permanent treaties. 

The lack of permanence involved in the maximum and mini- 
mum schedules is one of the most serious objections to it. If, for 
instance, a domestic industry has been protected by a maximum 
tarifif up to a given date, and then upon some foreign nation's com- 
pliance with conditions, it is given the minimum tariff, what is there 
to prevent the sacrifice of the domestic industry in question? Either 
the export concessions must be foregone or the home industry sacri- 
ficed to imports. 

This illustrates some of the legislative and administrative diffi- 
culties in the way of adapting a maximium and minimum tariff 
system to our increasingly complex commercial life. If Congress 
stops with a mere adoption of the double schedule, but does not go 
farther and follow up the strategic advantage lying beyond, by 
negotiating treaties which favor the more progressive export inter- 
ests, it will not be putting into practice the results of the world's 
best constructive experience in tariff policy. 



(398) 



TARIFF MAKING— FACT AND THEORY 



By H. E. Miles, 

Of the National Association of Manufacturers, Chairman Central Committee 
on Expert Tariff Commission, Representing Fifteen National Organizations. 



Although this paper is critical of the details of our tarii¥ laws, 
it is written by a protectionist, a manufacturer, and a Republican. 
My belief in the principle of protection to American industries and 
labor is so implicit and deep-seated that I have no patience with 
ways of indirection, and am impelled to protest against the abuse of 
an economic principle upon the right use of which depends the 
welfare of millions of manufacturers and laborers. 

To maintain political independence, which a nation must have 
if it is to exist at all, it is of greatest importance that the country 
should have economic independence. The former is greatly strength- 
ened by the latter. In its effort to secure economic independence, 
a new country faces at the outset the handicap of the centuries in 
accumulated capital, experience, skill and general development of 
older nations. These older lands are themselves rapidly progressing. 
The new country must advance not merely as fast but faster if it 
is to catch up. It is a patriotic duty to secure economic inde- 
pendence. 

It is, moreover, of inestimable money and intellectual advan- 
tage to a nation to diversify industries and to advance along many 
lines simultaneously, and this is especially so in a country where 
natural resources are so superior in quantity and quality as in the 
United States. 

It is necessary in a republic where all men vote and are equal 
before the law, that a high standard of living be maintained, and 
that every worthy man should have income enough to live in com- 
fort and to educate his children. To make this possible is a patriotic 
duty which the American people accept joyously. 

The very strength anc^ security of the protective tariff as a 
part of American polity often lead to abuse and corruption. The 
politician or the demagogue by portraying the dangers of free 
trade readily persuades his constituents to instruct him to champion 

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136 The Annals of the American Academy 

protection; and too often he uses his instructions as a cloak to cover 
his support of sordid interests and corrupt measures. The discus- 
sions of the tariff in poHtical campaigns are debates as to the merits 
of free trade or protection instead of being a consideration of the 
methods by which protection should be applied. Not in our genera- 
tion has even a Republican politician clearly outlined the principles 
that underlie rate making and justify with exactness particular rates. 
This was illustrated recently when I asked an important member 
of the Ways and Means Committee of the House upon what under- 
lying principle of measurement the rates rest. He could conceive 
of none. Another member of the committee bit his lips and walked 
away. He is personally responsible for a schedule that costs the 
American people from one to two million dollars per week. The 
first member then said, "Why, IMiles, if anyone down in my district 
w^ants anything, I get it for him, and I get all I can, and that's all 
there is to it." And so it is. Were that man to try to be specific, he 
could not justify a single schedule with any exactness. He is only 
a tariff horse trader, and resists any attempt to make him otherwise. 

I went with certain data to the man probably most responsible 
of all for the present tariff situation. Said he, "Do you think we 

don't know. Take Senator , of , for instance. He 

held up the Dingley bill till we gave him and his pals a wholly 
unwarranted tariff on borax worth to them over $5,000,000 in 
money. We had to have his vote !" 

And so it is that Nevada borax, the most easily mined and the 
best deposits in the world, is "protected" against inferior foreign 
deposits, and that the retail price of borax in England is 2)^ cents a 
pound, while in the United States it is 2^^ cents plus the 5 cents 
duty, or 7^ cents. This senator quickly sold the mines to an 
Enghsh syndicate for $12,000,000. What he sold was incidentally 
the mines, and in principal part, the right to tax the American people, 
by act of Congress, 5 cents per pound, or 200 per cent on its borax 
over and above a fair price. The congressman who told me the 
story said also, "If it were in my power I'd so fix it that the present 
tariff could not be altered one jot or tittle in sixteen years." And 
a people of high moral ideas exalts this man and his many followers. 

This man knows that when the Dingley bill was passed the 
cost of the manufacture of steel rails was $12 per ton in Pittsburg 
and $16 in England ; ocean freight was, and is, about $3.50, making 

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Tariif Making, 137 

$19.50 the English cost dehvered in New York, or 63 per cent 
above the Pittsburg cost. Imagine any congressman being so 
fooHsh or so daring as to attempt to explain why, with this 63 per 
cent of "natural protection," $7.80 per ton, or 65 per cent, more 
protection was given by Congress. The granting of a tariif like 
this is a farming out of the taxing power for private considerations 
and to private interests. 

Not long after the passage of this bill steel makers, guided by 
Wall Street promoters, put about one billion dollars of water into 
one corporation, and partly, at least, by the powers given to them 
in that tariff by Congress and the President, they have transfused 
the wealth of the people into that watered stock, in an amount not 
less than $1,000,000 per week, until it has become a most substan- 
tial property. Lesser concerns have taken as much more. Sales 
prices have been doubled. Seeking relief from abroad, domestic 
users have found the government of the United States practically 
preventing relief through importations at one-fourth lower prices, 
although these lower prices were being gladly met by our makers 
in neutral markets, and very profitably. 

Americans owning factories both in the United States and in 
Canada are buying Pittsburg steel cheaper for their Canadian fac- 
tories, and are supplying foreign markets from Canadian factories 
formerly supplied from the United States. Leading political manipu- 
lators, sometimes called statesmen, and even protectionists, know- 
ingly made all this possible in the name of protection to American 
industries and labor. 

Or consider pig iron. The wage cost at the furnace of con- 
verting the raw materials there assembled into pig is, as stated by 
Mr. Schwab, 41. i cents per ton of pig produced. Indeed, Mr. 
Schwab says that this covers, at the best furnace, also maintenance 
and overhead expenses. This seems almost incredible, but for more 
than a generation our steel men have taxed the belief of the manu- 
facturing world by the actual facts of their accomplishments. Cer- 
tainly pig, like all other steel and iron products, is produced cheaper 
in this country than anywhere else on earth. Mr. Gary fairly 
conceded this to a congressional committee, which, however, for 
some reason, failed to act upon the information. 

In utter disregard of the principle of protection Congress, under 
the influence of John Dalzell and in the name of the principle thus 

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138 The Annals of~the American Academy 

set at nought, put a duty of $4.00 per ton on pig iron — a duty about 
ten times the total wage cost of production at the furnace. It is 
interesting to know that Chairman Payne, of the Ways and Means 
Committee, fearing popular opposition, fought Mr. Dalzell on the 
steel schedule for two weeks. There are limits to which even Mr. 
Payne goes reluctantly. A friend tells me Mr. Payne has said, 
"Why, logically, the steel people deserve no duty at all." 

The next greatest industry after iron and steel is textiles, with 
an output, as I remember, of about $800,000,000 per annum. The 
provisions of the textile schedule pass all belief. No industry more 
clearly deserves and requires protection. No industry has less need 
of devious and unfair rates and methods. The output of all the 
woolen mills of IMassachusetts by a recent census, is of the yearly 
value of $200,000,000. The wages in the mills total $50,000,000, or 
25 per cent of the output. Wages are there 60 per cent higher 
than in Great Britain which would make the British rate 16 per 
cent of the output on the basis of American values. The difference 
in wage cost is therefore 9 per cent. It would seem that twice this 
9 per cent, or 18 per cent, would be moderately protective, and 
three times, or 2y per cent, almost liberally protective, with some 
allowance possibly, to the wool growler. But the rates run from 
75 per cent to 165 per cent as measured by the money actually paid 
in at the customs houses. This latter figure, however, marks only 
the point of legislative prohibition, beyond which the rates mount 
to 200 per cent and upwards. There is neither honesty nor com- 
mon sense in this schedule, unless the evidence of extreme manipu- 
lation on the part of the manufacturers is to be so considered. 

Reference may also be made with propriety to pressed glass, 
which is made so cheaply in the United States that it is exported to 
places of foreign manufacture and there sold at better than American 
prices. The leaders in that industry were Invited by Mr. McKinley 
to write tfteir own schedules for the McKinley bill, "and to make 
them fair." This was, and Is, quite the common practice. The com- 
mittee of glass men, thus placed upon honor, put pressed glass on 
the free list. But it appeared in the law finally at 65 per cent duty. 
Evidently greedier men secured the change, and with the proof of 
their unfairness already before Congress. 

The present political methods of tariff making offer special 
inducements and opportunities for the corrupt use of corporate 

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Tariff Making. 139 

influence. Having millions of possible profits at stake in the fixing 
of a tariff rate, it is no wonder that the trusts and other special 
interests will spend large sums to influence elections and to control 
the actions of members of Congress. A congressman, who repre- 
sents one of the most important manufacturing sections of the 
United States, said to me, "My people would, I believe, spend 
$25,000,000 to keep the tariff right where it is." The special in- 
terests have been quite willing to make campaign contributions, 
and their aid has been given to whichever party is in power. As 
the late president of the Sugar Trust testifies, "We give large con- 
tributions to Republican campaign funds in Republican districts ; 
to the Democrats in Democratic districts ; and divide the funds 
equally between the two parties in doubtful districts."' That num- 
erous men prominent in public life have been corrupted by money 
spent to control the tariff is a fact of which there is conclusive 
proof. 

Our tariff schedules and the methods followed in working them 
out constitute a national scandal. The tariff is a moral as well as 
an economic question, and a popular demand for a tariff that shall 
be honestly and equitably protective is greatly needed. A general 
public agitation to accomplish this end could hardly fail to meet 
the approval of the President of the United States. If Mr. Taft 
should be elected, he will surely w^elcome such a popular movement. 
He will not want to sign a dishonest tariff bill. The President, it 
should be remembered, shares with Congress the work of tariff 
making. This fact has not been pressed home strongly enough. 
The American people will not again look on complacently while a 
President signs a tariff bill with one eye shut and the other blinking. 



The Way Out 

Nothing is easier and simpler than the making of an honest, 
scientific and helpful tariff. I do not mean by this that it can be 
done in a night-time, nor with small care. It requires the ceaseless 
patient endeavor of high-minded men, expert in manufacturing pro- 
cesses, in international trade relations and in tariffs of this and 
other countries. 

Four principles heretofore wholly disregarded must be con- 
stantly and thoroughly respected. These are : 

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140 The Annals of the American Academy 

i. Protection to the consumer. 

2. Domestic competition. 

3. International costs and foreign competition. 

4. Reciprocity, with maximum and minimum schedules. 

Protection to the Consumer 

The benefits of the tarifif should accrue to all the people and 
not to a few politicians and manufacturers only; nor to the manu- 
facturers and their dependents in Congress and in Wall Street. 
The money in the pockets of the public belongs to the individuals 
who comprise that public, and cannot lawfully be taken from those 
pockets except upon full and fair equivalent. The makers of the 
constitution were themselves so upright and clear minded upon this 
proposition they did not stop to consider that Congress could, much 
less that it would, rob the people under the taxing clause. They 
would have considered unconstitutional such abuses as now prevail. 
They justified the original bill, which gave average protection of 
only 5 per cent, upon the ground that it was of such direct benefit 
to every inhabitant as fully to recompense him. To-day our law- 
makers ignore the rights of the consumers and the public in their 
service of the corporations. 

The shoe is now on the other foot. The taxpayer is held to be 
the property, as it were, of the manufacturers and promoters. 
Instead of the manufacturer proving that he is entitled to a certain 
tariff, he is held to deserve the earth and all its increase. Con- 
sumers are not expected to assert either rights or interest in the 
charges made against them. 

The public must not again permit the consumers' interests to 
be sacrified as they were, for instance, in the present woolen and 
sugar schedules. The woolen manufacturer, upon submission of 
proof that imported wool was used in making exported yarn, may 
secure a drawback of the duties paid. The evidence shows that 1 5^ 
pounds of wool are used in making a pound of yarn, but the tariff 
allowance is for 2j4 pounds of wool. When the tariff rates on 
sugar were being considered by the Ways and Means Committee 
the representatives of the Sugar Trust ^insisted upon certain rates, 
but declined to give the figures and other proofs showing the neces- 
sity for the rates. The result was that the committee "com- 
promised" with the trust by giving it more than would have been 

(404) 



Tariif Making. I4I 

given had there been specific data at hand from which to make the 
rates. Who, it may fairly be asked, was in real control of tariff 
making that day, the people through their representatives, or the 
trusts with their friends on both sides of the committee table? The 
result has been sugar prices higher in the United States than in 
Great Britain, and a tariff rate exceeding the total cost of produc- 
tion, including the expense of raising the beets, 

Competition 

Competition was for many years considered a cure-all for tariff 
labuses. In competition Congress took refuge as against all criti- 
cism. Mr. Carnegie show^ed the reliance the public thus placed 
upon this when he said, in 1884, concerning steel: 

We are creatures of the tariff. If ever the steel manufacturers attempt 
to control or have any general understanding among them, the tariff would 
not exist one session of Congress. The theory of protection is that home 
competition will soon reduce the price of the product so it will yield only 
the usual profit. Any understanding among us would simply be an attempt 
to defeat this. There never has been, or ever will be, such an understanding. 

Mr. Carnegie did not foresee what would occur. Excessive, 
dishonest, and unreasonable rates made by Congress and the admin- 
istration have been the principal inducement for the destruction 
of competition and the formation of trusts for fifty years, during 
which time a very great number of the tariff rates have been not 
protective in any sense, but have been prohibitive. Prohibition of 
imports is not protection. 

Congress might almost as well decide that there shall be no 
competition as to give, as it now does, to shrewd American business 
men rates that are practically prohibitive of imports upon billions 
of dollars worth of the requirements of the people. In my own 
business, for instance, a protection of 15 per cent to 25 per cent is 
necessary, but Congress gave us, under an omnibus clause, 45 
per cent. In doing this it permitted, if it did not invite us, to 
consolidate, and to add to our sales prices about 20 per cent and 
treble our profits, possibly quadruple them. At any rate the 
strong arm of the government will not permit of foreign compe- 
tition, and so by our elimination of domestic competition, the people 
can be put wholly at our mercy to the extent of the excess duty, 

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142 The Annals of the American Academy 

And this is what has happened with most of the necessities of life. 
The government under both poHtical parties has aided, abetted, 
and enriched trusts and trust makers insistently and outrageously. 
Domestic competition has been so far eliminated that it is no 
longer to be reckoned with as of saving consequence. 

International Costs and Foreign Competition 

With home competition gone, this principle of international 
costs remains substantially our only salvation. It is a pleasure 
to note that this, as a living and vital principle, was first brought 
clearly and emphatically to the public mind by the American manu- 
facturers themselves, through their leading organization, the 
National Association of Manufacturers, which for years has de- 
clared that the tariff should measure, in Mr. Taft's language, 
''Substantially the permanent dift'erential between the cost of pro- 
duction in foreign countries and in the United States." This prin- 
ciple is itself one of competition, limiting the possible extent of 
trust extortion under tariff by the opportunities of foreign com- 
petition after the limits of a proper protection have been reached. 

Protection does not mean that the prize-fighter shall be protected 
against the child, but rather the child against the prize-fighter. 
Our manufacturers are protected when they are given a tariff rate 
that measures this difference in international costs, and makes 
them the equal in matter of costs of the producers of the same 
articles in Europe and the Orient. 

The Senate recently stated this principle in a resolution con- 
cerning the next revision and implied that revision would be based 
upon this principle, as it must be if fair. But with extreme regret 
I note that the sub-committee to which the question of revision is 
referred is composed of men who presumably represent in business 
life the over-protected interests. 

The tariff committee of the House has made a display of 
getting exact information, but I know that they will not regard this 
principle or any other. They talk of using experts; but the men 
on these committees are the men discredited in recent years by the 
progressive wing of the Republican party, and finally at the Chicago 
convention. The data derived from experts will hardly be of great 
influence. This principle of the difference between the cost abroad 
and at home, as determining the rate was accepted in Chicago and 

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Tariff Making. 143 

made an important part of the Republican platform. The ultra- 
protected interests, however, secured the addition of a clause which 
opens the door to excessive rates, as heretofore. The plank reads: 
*'The true principle of protection is best maintained by the impo- 
sition of such duties as will equal the difference between the cost 
of production at home and abroad, together zmth a reasonable profit 
to American industries. 

The government does not guarantee profits to the wheat grower, 
good incomes to clerks, and clergymen, nor steady employment to 
labor. Is it to guarantee profits to trusts only? This clause would 
not help those who manufacture and sell under old-fashioned com- 
petition, for competition keeps their profits at the minimum, or de- 
stroys profits. But when trusts have only foreign competition to fear 
and the government gives them a duty which brings their costs oii 
a parity with Europe and Asia it gives them full and fair protection, 
trusts though they are. When it adds to such protection a guar- 
antee of profits also, it practices the worst sort of class favoritism, 
and in a quarter where it is least of all pardonable. This sort of 
'protection" is equal to a guarantee of stocks, bonds, and income, 
at the expense of the people. 

The statement of principles in party platforms is not to be 
taken very seriously. Rather let us hope that Mr. Taft, who secured 
so much in the acknowledgment of the principle that tariff should 
be based on international cost differences, will now^ successfully 
assist the people to its definite and fair application. The National 
Association of Manufacturers has declared for the exact difference 
in costs, to be figured, however, with such reasonable and ample 
margin of safety against contingencies as ordinary prudence 
justifies. 

The proper application of this principle to the rates wall oblit- 
erate so much of the controversial and party differences that it will 
cause the tariff to be seen with new eyes. Tariff extortion will 
cease. The moral tone of politics and business will be immeasurably 
advanced. Home users will purchase at fair prices, and, for the 
most part, as cheaply as foreigners now buy from us. These equali- 
zations of advantages will afford us w^orld-wide trade opportunities 
of Inestimable advantage to us at all times, and especially in dull 
times like the present. 

(407) 



l44 f ^^ Annals of the American Academy 

Reciprocity 

Fortunately, we are, at last, almost certain that the next tariff 
will be one of maximum and minimum schedules, leaving us no 
longer alone among the nations and unable to make trade agree- 
ments for the extension of commerce. 

It was President McKinley's fondest hope as he took office to 
make his administration distinguished by reciprocity treaties, under 
the provisions of the present law. Great was the public disappoint- 
ment when those who permitted these provisions to be incorporated 
in the law only as a vote-catching and specious sop to the public, 
prevented the fulfilment of his hope. Reciprocity should be made 
a prominent feature of our future tariff legislation. The importance 
of securing expanding foreign markets for our manufactures makes 
this imperative. 

With an honestly made tariff that does not unduly burden the 
consumer, that permits of healthful foreign competition, that is as 
high, and only as high, as is required to place domestic and foreign 
producers on a parity, that provides for reciprocal trade agreements 
in the interest of a larger foreign trade, American industries will 
prosper by honest and equitable methods. 



(408) 



A PERMANENT TARIFF COMMISSION 



By Hon. Albert J. Beveridge, 
United States Senator from Indiana. 



At the beginning of the last session of Congress I introduced 
a bill for a permanent tariff commission. This bill seeks to create a 
commission of experts to find out the facts upon which Congress 
builds a tariff and to make a classification of articles, to which Con- 
gress can plainly and accurately fix customs duties. The commission 
itself is not allowed to fix duties or even to suggest any rate. The 
fixing of duties is left to Congress. The commission is kept strictly 
to the task of gathering facts and making clear classifications ; the 
first is expert investigating w^ork, the second expert clerical work. 
Neither is properly legislative work. In short, by this bill the 
commission is an assistant of Congress, a servant of Congress. Of 
course the commission ought also to recommend rates ; but in the 
present mind of Congress I realized that it is impossible to get such 
a provision passed ; so I left it out. 

It is the business men who must do business under the tariff, 
and therefore the American tariff should be a business men's tariff 
and not a politician's tariff. What is wanted is a scientific tariff 
that will do justice to all interests and to all men, and not a log- 
rolling tariff which does less than justice to some interests in order 
that it may do more than justice to other interests. What is wanted 
is a tariff which will open to our products the markets of foreign 
countries, and above all we want a tariff builded upon facts instead 
of suppositions. 

The appeal to the only power which really rules this country, 
American public opinion, has forced from those who thought that 
the Dingley law is sacred, and that time which changes all condi- 
tions changed nothing with reference to tariff rates, a concession 
that they were wrong and that the Dingley law at last must be 
replaced by a law which will be up to date. 

Next year when the Dingley law is revised it will have been 
in force nearly twelve years, a longer time than any tariff has lasted 

(409) 



14^ The Annals of the American Academy 

since the Civil War, a longer time than any tariff except two has 
lasted since the foundation of this republic. 

Yet during the last twelve years, conditions have been revo- 
lutionized, and the industrial world has speeded forward more 
rapidly than in any fifty years in our history ; and what is now de- 
manded is that the tariff rates of twelve years ago shall be made 
up to date. Tariff rates that twelve years ago may have been 
just, changing conditions to-day have, in some instances, made 
unjust now. And our tariff classifications — they are a generation 
old and, by rulings of the board of appraisers and the courts on 
new and unclassified articles, have been made chaotic and unin- 
telligent. Surely these classifications should be made modern, clear 
and understandable. 

In considering the problem of our customs duties we must 
remember that the first element is the facts. The tariff should be 
fixed by facts ; how to get at these facts is the first question in the 
whole tariff problem. If any man needs the facts more than 
another it is the protectionist like myself, because we cannot 
wisely protect any business unless we know the facts about that 
business. In a purely revenue tariff some duties can be fixed 
without any facts, such as duties on coffee, tea, chocolate, tropical 
fruits ; and other food necessities ; for such a revenue tariff must 
include all of these because they are consumed by all of our people, 
not produced by any of our people, and therefore would be the best 
revenue producers of all imports. 

Still the facts are also necessary to the advocate of a purely 
revenue tariff; for even such a tariff must sweep through thousands 
of articles because our needed revenue is so great. So the man who 
is for a purely revenue tariff should know the facts, and a man 
who is for a protective tariff must know the facts. 

How then can we best find out the facts upon which a 
tariff should be based? Common sense and experience answer the 
question. We should create a body of experts to find out these 
facts for us. These men should be the fittest men that can be 
found for this work ; they should give their whole time to this work 
and lay before Congress the result of their investigations. 

This plan is followed in business. Our largest industries keep 
experts at work all the time finding out the facts on which every 
branch of their trade depends. They send such men to all parts of 

(410) 



A Permanent Tariff Commission I47 

the country and world to learn about new resources, trade condi- 
tions and everything which helps them to do their business wisely. 

Again, when a court of equity must hear a cause where large 
and varied accounts are to be examined, or where masses of testi- 
mony are to be taken and shifted, the chancellor appoints a special 
commission to find out these widespread and mixed-up facts and 
lay them before the court classified and summarized. 

Conditions have compelled us to do the same thing in govern- 
ment. For example. Congress created the Bureau of Corporations 
for this purpose. After years of thorough work by this bureau no 
man in any party proposes to destroy it, or stop its labors. The 
same is equally true of the Bureau of Labor. 

The Senate some months ago ordered an investigation by these 
experts of a certain great trust. When it was proposed to stop 
this investigation the Senate, after full debate, refused to do so. 
Again, a few months ago the President sent a commission to Gold- 
field, Nevada, to find out the facts about the strike at that place, 
so that he could know whether to keep the nation's soldiers there or 
not ; and everybody agreed that this was wise and necessary. 

Again, Congress created the Industrial Commission to find out 
certain facts. The report of this commission and those of the Inter- 
state Commerce Commission resulted in the law for the Deparament 
of Commerce and Labor, the Bureau of Corporations, the Elkins 
law, the Rate law, the Immigration law, and most of the reform 
laws of the last six years. 

Again, Congress created the Merchant Marine Commission to 
find out the facts about our shipping and carrying trade ; and while 
nothing has been done, yet we have the facts. Whether upon these 
facts Congress may think it wise to do nothing or to do something, 
still Congress has no longer the excuse of ignorance. 

Again, more than twenty years ago a law was passed estab- 
lishing the Interstate Commerce Commission. During most of its 
existence its duties have been chiefly and still largely are the finding 
of facts which Congress could not find — facts about rates, discrimi- 
nations, and the like. No man in any party now proposes to abolish 
that commission or curtail its powers. 

But if we thought it wise for the President to send a commis- 
sion to find out the facts in so simple a matter as a strike at Gold- 
field ; if it is wise for a chancellor to appoint special examiners and 

(411) 



148 The Annals of the American Academy 

commissioners to find out and report the facts in single cases; if 
the Senate directs the Bureau of Corporations to find out the facts 
about the doings of a single trust in a single branch of its activities ; 
if Congress creates a body of men to find out the facts about any 
great business which the President thinks should be investigated, 
and if its work is so wise that no man in any party asks that that 
work be stopped, how much more should we create a body of men, 
specially fitted for the work, to find out the facts about our tariff, 
which is more important, more intricate, more difficult than all 
these other things put together. 

If we provide experts to find out the facts about things which 
have to do with comparatively few of the people, how much more 
should we provide experts to find out the facts about a thing which 
has to do with all of the people. If we take such measures to learn 
the truth about matters which are easy to learn, how much more 
should we take similar measures to find out the truth about a 
matter that is hard to learn. 

If it be said that we have no right to know the facts about 
any business, the answer is that when that business asks for pro- 
tective duties, we can fix those duties only by knowing the facts 
about that business. If we fix duties only by what that business 
says it wants, its managers would be fixing its own tariff instead 
of our fixing its tariff. Its managers would be making a tariff law 
for themselves instead of Congress making a tariff law for the 
people. Would it not seem that any business or any man who is 
against the plan of having experts find out the facts, does not want 
the facts found out. 

Our tariff covers thousands of items. Whether duties should 
be placed upon these articles is a question of fact. The amount 
of the duty is an even harder question of fact. Heretofore we have 
forced committees of the House and Senate to find out these facts. 
These committees do not work at the task all of the time. They 
work at it only when the tariff is being revised, which is about once 
in every ten years. Even then these committees work for but a 
few months, and only part of the time during these few months. 
That part of the time during these few months is not given wholly 
to the task of finding out the facts, but also to the fixing of duties 
upon these facts, considering how each of these duties affects the 
others, how each of them taken alone and all of them taken together 

(412) 



A Permanent Tariff Commission 149 

affect our foreign and domestic trade, and all of the other things 
that must be thought of in making a tariff. 

For example, the Committee on Ways and Means of the House 
that framed the Dingley bill reported that bill the nineteenth day of 
March, 1897, so they did all the above work in less than three 
months. The Committee on Finance of the Senate took this bill 
and reported it back on the 4th of May, 1897, so the Finance Com- 
mittee did all its work in six weeks. 

Again, the Committee on Ways and Means of the House that 
framed the McKinley bill reported that bill the sixteenth day of 
April, 1890, doing the work in less than five months. The Com- 
mittee on Finance of the Senate took this bill and reported it back 
the seventeenth day of June, 1890, so the Finance Committee did 
all its work in two months. 

Again, the Committee on Ways and Means that framed the 
Wilson bill reported that bill the 19th of December, 1893, so they 
did all the work in a little over four months. The Committee on 
Finance took this bill and reported it back the twentieth day of 
March, 1894, so the Finance Committee of the Senate did all this 
work in three months. 

Compare this with the work of other Senate committees. On 
January 2y, 1904, the Senate instructed the Committee on Privileges 
and Elections (one of the ablest committees of the Senate) to inves- 
tigate the case of Reed Smoot, a Senator from Utah. Two years 
and six months later that committee made its report. Of these 
thirty months some members of the committee were at work all 
the time ; and the full committee worked in actual session six solid 
months. The committee was aided by associations and persons 
who employed attorneys, detectives, etc., to look up facts and find 
witnesses. 

If it took a Senate committee two years and six months work- 
ing in some form all the time, and working steadily as a full com- 
mittee six solid months to find out the facts in a single phase of the 
life of a single Senator, as was true in the Smoot case, how could a 
House committee, working part of the time for a few months and a 
Senate committee working part of the time for a few weeks, find 
out all the facts about all the articles in our tariff on which that 
committee fixes duties? 

Is it not plain that these committees, no matter how able, wise 

(413) 



150 The Annals of the American Academy 

and industrious, were overworked? Is it not asking too much of 
any man to crowd so much labor into so short a space ? Is it fair 
to those committees? Is it fair to Congress? Is it fair to the 
tliousands of American industries wliich, in their business, are 
affected by the tariff? Is it fair to the 90,000,000 of the American 
people who, as consumers^ are affected by a tariff? 

But not only are these committees forced to do this vast work 
in this brief time, but the members of these committees must do 
other heavy work at the same time. 

For example, the present committee of the Senate which must 
do the Senate work of tariff revision is presided over by Senator 
Aldrich, but he is also a member of the committees on Interstate 
Commerce, Rules, Cuban Relations, etc. 

The other members of the Senate committee are : 

The Senator from Maine (Mr. Hale), but he is also chairman 
of the Committee on Naval Affairs, a member of the commit- 
tees on Appropriations, Philippines, Census, Canadian Relations, 
etc. 

The Senator from -New York (Mr. Piatt), but he is also chair- 
man of the Committee on Printing and a member of the committees 
on Naval Affairs, Interoceanic Canals, Civil Service, etc. 

The Senator from Iowa (Mr. Allison), but he is also chairman 
of the Committee on Appropriations, etc. 

The Senator from Michigan (Mr. Burrows), but he is also 
chairman of the Committee on Privileges and Elections, a member 
of the committees on Naval Affairs, Philippines, Post Offices and 
Post Roads, etc. 

The Senator from North Dakota (Mr. Hansbrough), but he 
is also chairman of the Committee on Public Lands and a member 
of the committees on the District of Columbia, Agriculture and 
Forestry, Irrigation, Library, etc. 

The Senator from Pennsylvania (Mr. Penrose), but he is also 
chairman of the Committee on Post Offices and Post Roads and a 
member of the committees on Commerce, Education and Labor, 
Immigration, Naval Affairs, etc. 

The Senator from Illinois (Mr. Hopkins), but he is also chair- 
man of the Committee on Enrolled Bills and a member of the com- 
mittees on Commerce, Census and Interoceanic Canals. 

The Senator from Virginia (Mr. Daniel), but he is also a 

.(414) 



A Permanent Tariff Commission 151 

member of the committees on Appropriations, Education and Labor, 
and is chairman of the Committee on Public Health. 

The Senator from Colorado (Mr. Teller), but he is also a mem- 
ber of the committees on Appropriations, Philippines, Pensions, 
Mines and Mining, Geological Survey, and is chairman of the Com- 
mittee on Private Land Claims. 

The Senator from Mississippi (Mr. Money), but he is also a 
member of the committees on Foreign Relations, Railroads, Agri- 
culture and Forestry, etc. 

The Senator from Texas (]Mr. Bailey), but he is also a mem- 
ber of the committees on Rules, Census, Irrigation, etc. 

The Senator from Florida (Mr. Taliaferro), but he is also a 
member of the committees on Military Affairs, Coast Defenses, 
Interoceanic Canals, Cuban Relations, Post Offices and Post Roads, 
Pensions, and the Census. 

We must suppose that each of these Senators attends to the 
work of every committee on which he is a member — otherwise 
why is he a member of those other committees? The same is true 
of the members of the Ways and Means Committee of the House. 
But it may be said further that an examination of their occupations 
does not show that the Ways and Means Committee of the House 
or the Finance Committee of the Senate are especially fitted by 
their occupations and life-work to act as experts in finding out the 
facts or arranging the classifications. 

A list of the members of the Ways and Means Committee of 
the House of Representatives who framed the Dingley bill, shows 
that every member of that committee at that time, with two excep- 
tions, was a lawyer; one was an editor and one was a wood manu- 
facturer. 

Take the present Ways and Means Committee of the House. 
A mere reading of their names and their occupations in the Con- 
gressional Directory does not disclose that they are especially fitted 
by their life-work for economic investigation — all of them but two 
are lawyers, one is a lumberman and one has no occupation at all. 

But this is not all. Each one of these Senators and Represen- 
tatives is busy with politics in his own state. Some of them are 
leaders of their party. Some of them are lawyers in active prac- 
tice. Some of them are managers of great business interests. But 
suppose that not a man of them did anything in politics, business, 

(415) 



152 The Annals of the American Academy 

or law. Suppose every one of them were to quit all his work in 
the Senate and in the House except the work of the Finance Com- 
mittee of the Senate and of the Committee on Ways and Means 
of the House. Suppose, for example, the Senator from Iowa (Mr. 
Allison) were to leave his tremendous duties as chairman of the 
Appropriations Committee; suppose the Senator from Maine (Mr. 
Hale) were to leave his duties, so delicate and so complex, as 
chairman of the Naval Affairs Committee ; suppose that every mem- 
ber of this committee were to abandon every duty to which he is 
assigned on the other committees of the Senate and were to devote 
his entire time for the few months during the short period when 
the tariff is revised to the sole work of finding out the facts con- 
cerning thousands and thousands of articles, of fixing the duties on 
those articles, of considering their effect on domestic and foreign 
trade, on the producer and consumer, and all the other things, 
would it not be difficult for them to do that ? 

These committees have hearings, sometimes private, sometimes 
public. At the public hearings the committee rooms overflow with 
representatives of various interests. The private hearings are 
equally congested. Both are rushed and confused. At these hear- 
ings there is no time, no opportunity, to go into any one subject thor- 
oughly ; to test the statements there made ; to verify supposed facts. 
If any interest wishes to get an unjust rate of duty, the hurry, 
confusion, incompleteness of these hearings give that interest the 
chance ; and the still greater hurry and difficulty of fixing the duties 
themselves adds to that chance — all this, of course, without any 
member of the committee knowing or intending to aid such an 
interest in such a w^ay. 

The most honest and alert man could not possibly prevent or 
even know about incorrect statements ; and the best of men might 
be excused from making a tariff rate which they did not intend to 
make and which, had they known all the facts, they never would 
have made. 

The whole work of these committees is rushed. Business waits 
to know the new duties ; and so the committees are driven at greatest 
possible speed. How easy in this necessary haste for certain inter- 
ests to get unjust rates without the committee knowing that they 
are unjust, as well, as for the committees themselves to make mis- 
takes both of fact and judgment. 

(416) 



A Permanent Tariff Commission 153 

Direct and positive evidence of the impossibility of a committee 
of Congress finding out the facts in the brief hearings which were 
given to various interests is furnished by the Hon. Sereno E. Payne, 
chairman of the Ways and Means Committee of the House. In a 
work entitled 'The Making of America," Mr. Payne contributed 
an article on "The Tariff and the Trusts." In this article he says : 
******* 

But let us first consider the history of trusts in the United States. 
******* 

Perhaps as good an example as we can find of the earlier form of a 
trust is in "The Sugar Refineries Company," which was formed in 1887. 
The facts in respect to this company have been pretty thoroughly investi- 
gated in an action brought by the people of the State of New York against 
the North River Sugar Refining Company, which was one of the original 
parties to the deed of trust. This case is reported in full in 121 New York 
Reports, page 582. There were seventeen sugar refining companies which 
entered into this combination. Some of these companies were co-partner- 
ships, others were incorporated. 

Then follows a long and detailed account of the Sugar Trust, 
and Mr. Payne goes on: 

Here, then, was a trust, pure and absolute, formed by these seventeen 
companies. Each put its property, and endeavored to place its franchise, 
under the control of a board which was to hold the property as joint tenants 
and as trustees, but had the power of absolute control. It was a trust pure 
and simple. . . . The board of trustees, formed as we have seen — [and 
now we come to the making of the tariff upon this matter] — forget to carry 
out the original intention of the deed of trust. They did endeavor "generally 
to promote the interests of the parties hereto" with a vengeance, but they 
evidently did not keep the price of sugar as low as was consistent with 
reasonable profit. Notwithstanding the enormous watering of stock, divi- 
dends unheard of before were declared and paid upon the certificates issued 
by this board of trustees. As the product of this combination was a neces- 
sary of life required by every class of people, the excessive profits demanded 
soon called the attention of the people to the existence of this monopoly. 
Nobody objected to refining sugar in this country. Indeed, there was every 
reason why this business should be carried on exclusively in the United 
States in order to supply our markets. The object of forming the sugar 
schedule of the tariff in 1890, and again in 1897, was to learn, as nearly as 
possible, the exact cost of refining sugar, and then to adjust the tariff as 
to protect the labor interests, and no more. Investigation into this subject 
proved very irksome and troublesome. It was impossible to get at the exact 
facts, as the experts were not inclined to reveal the secrets of their business 
to the Committee on Ways and Means. Different statements were made as" 

(417).. 



154 The Annals of the American Academy 

to the cost of refining by different refineries, and then the best that could 
be done was a compromise rate for the differential duty between raw and 
refined sugar. 

If it is said that, no matter how hard the work nevertheless 
these committees actually have done it in the past, one answer is 
suggested in the bills which these two committees reported when 
the tariff was last revised. I have carefully gone over the bill that 
Mr. Dingley reported to the House and which the House passed, 
also the bill which Mr. Aldrich reported to the Senate, and have 
tabulated the duties which these two bills fixed on the same articles. 
The duties fixed on most of them by the House bill differ widely 
from those fixed by the Senate bill, and in many cases the differences 
are so wide apart that they are startling. 

For a few examples see table on following page. 

In the cotton and woolen schedule, the steel and iron schedule, 
and the glass schedule the House and Senate differ on numerous 
items. Frequently the House fixed specific duties, the Senate ad 
valorem duties. Sometimes the House and Senate put articles on 
the "free list'' and the conference committee put heavy duties on 
these very articles. Sometimes the conference committee disre- 
garded the duties of both Senate, and House and fixed different 
duties and on a different basis ; yet the conference committee was 
in session only five days. 

Could the Senate and House committees have had the same 
information? If so, why these wide differences? If they had the 
same facts, how could the divergence in their judgment as to what 
duties ought to be fixed on those facts have been so great as the 
examples I have given? Remember that the members of these 
committees were experienced, able, careful men, and a majority of 
each committee were high protectionists. What explanation can 
there be except that these two committees were differently informed, 
or insufficiently informed, or both? Had these facts been carefully 
gotten up by a body of expert men, specially fitted for that work 
and with plenty of time to do the work, could there have been these 
astounding differences? 

But as serious a matter as finding out the facts, fundamental 
as that is, is the matter of classifications. Most of the classifica- 
tions of the present law are over a generation old. Very few of 
them are modern and up to date. The reason of this is that when 

.(418) 



A Permanent Tariff Co 



ni mission 



155 



DiNGLEY Bill in House and Senate. 



Article. 


Duty fixed by House 


Duty fixed by Senate 


DiflFerence. 


Committee. 


Committee. 


Per cent. 


Borax 


2 cents per pound . . . 


5 cents per pound . . . 


150 


Borate of lime 


2 cents per pound . . . 


4 cents per pound . . .' 


100 


Boracic acid 


3 cents per pound . . . 


5 cents per pound . . . 


661 


Fusel oil 


yi cent per pound. . . 


X cent per pound . . . 


100 


Opium 


$6 per pound 

2K cents per pound. . 
20 cents per pound . . 


$8 per pound 

iK cents per pound. . 
10 cents per pound . . 


364 


Nitrate of lead 


66! 


Phosphorus 


100 


Soda ash 


X cent per pound. . . 


% cent per pound . . . 


50 




Free list 






Unmanufactured pumice stone .... 


20 per cent 


10 per cent 


100 


Spectacles, eyeglasses, etc., of a cer- 


2 5 cents per dozen 


40 cents per dozen 


*6o 


tain value, but not o\'-er 75 cents 


and 20 per cent. 


and 20 per cent. 




a dozen. 








Coral and spar 


2 5 per cent . . . 


50 per cent . 


100 


Railway fish plates or splice bars, 


K cent per pound . . . 


.4 cents per pound. . . 


25 


iron or steel. 










50 cents per dozen. . . 
7 5 cents per dozen. . . 
$1 per dozen and 15 


Duty omitted 




On other knives 


Duty omitted 

50 cents per dozen 




Razors and razor blades of a cer- 


*IOO 


tain value. 


per cent. 


and 15 per cent. 




On razors and razor blades of a 


$1 per dozen and 15 


$1.75 per dozen and 


*7S 


different value. 


per cent. 


20 per cent. 




Scissors and shears of a certain value 


so cents per dozen 


15 cents per dozen 


t*333i 




and 15 per cent. 


and 15 per cent. 




Files of a certain length 


30 cents per dozen. . 


so cents per dozen. . . 


66§ 


Files of a different length 


60 cents per dozen. . . 


$1 per dozen 


66f 


Planed or finished lumber 


50 cents per M feet. . 


35 cents per M feet. . 


42? 


On the same, if planed on one side 


$1 per M feet 


70 cents per M feet. . . 


42? 


and tongued and grooved. 








Toothpicks 


2 cents per M and 15 


I Cent per M and 15 


*ioo 




per cent. 


per cent. 












Saccharine 






t*ioo 




per cent. 


per cent. 




Chicory root . 


I cent per pound .... 
6 cents per pound . . . 


Free list 




Cocoa butter 


3K cents per pound. . 


71? 


Substitutes for coffee 






3.?§ 


Still wines 


60 cents per gallon . . 


30 cents per gallon.. . 


100 


Certain cotton cloth 






23A 




yard. 


yard. 




Stockings, hose etc., of a certain 


so cents per dozen 


60 cents per dozen 


*20 


value. 


pairs and 15 per 


pairs and 15 per 






cent. 


cent. 




Tow of f^ax, retted 


$22.40 per ton 

8 cents per square 
yard. 


$11.20 per ton 

4 cents per square 
yard. 




Floor mattings 


100 






Carpets of a certain value 


6 cents per square 


10 cents per square 


*66§ 




yard and 35 per 


yard and 35 per 




- 


cent. 


cent. 





* In the specific part of the duty. 

t And 33i per cent in the specific part of. the duty. 

t And so per cent in the ad valorem part of the duty. 

the committees come to revising the tariff in the great hurry I have 
shown has always existed and must exist, they were engrossed 
with the question of fixing duties, and so they took the language 
of the old classifications. 

The result of this is that the importer very frequently does 
not know in what classification his import falls or what duty he 
pays. He must go first to the appraiser, who decides the question 
for him, and then, if dissatisfied, to the Board of Appraisers, and^ 

.(419) 



156 The Annals of the American Academy 

if still dissatisfied, to the courts. In the last ten years since this law 
was enacted there have been 300,000 such cases decided, and 600,- 
000 begun. 

These boards of appraisers and the courts^ by deciding a classi- 
fication to which any import belongs, are legislating every day, just 
as much as Congress legislates when it fixes the duties. 

And worse than this, these contests have cost the government and 
the importers millions of dollars ; worse than this, this fact has lost 
to the importing industries many more millions of dollars; and far 
worse than all this, the industries thus affected have been confused, 
disturbed, and uncertain ; and far worse than all this, the whole cost 
must fall upon the entire body of the American people, from whom 
the revenue is raised to pay the expenses of the government. 

I should not myself care, if the imports were merely used by 
people who prefer foreign goods to American goods, how much they 
paid ; but remember that more than two-thirds of all of our impojrts 
are for the use of American manufacturers, who work these imports 
up into €nished products and then sell them here or abroad. 

For want of an up-to-date and scientific classification there 
have been the most amazing varieties of articles arbitrarily classified 
by boards and courts which in doing it are legislating in the most 
astonishing way. I will give a single illustration. Section 193 of 
the Dingley law reads as follows: 

"Articles or wares not especially provided for in this act, com- 
posed wholly or in part of iron, steel, lead, copper^ nickel, pewter, 
zinc, gold, silver, platinum, aluminum, or other metal, and whether 
pai*ly or wholly manufactured, 45 per cent ad valorem." 

Under that paragraph our customs officers have subjected to the 
45 per cent ad valorem the following articles : Stoves, implements, 
electrical apparatus, andirons, gold and silver boxes, tin or brass 
boxes, brass ball chains, brass buckles, brass tubes for bedsteads, 
brass wire, brass sheets, brick trowels, britannia metal ware, bronze 
cxosses for churches, bullets, bull's-eye lanterns, buttons with metal 
shanks, cabs, carriages, carts, buggies, trucks, railway cars, auto- 
mobiles, candelabra, cannon, metal capsules, iron castings, cast- 
steel tools, chafing dishes, chisels, church bells, coal scuttles, curry- 
combs, compasses, nails, copper spikes, copper wire, cranks and 
shafts, curriers' knives, daguerreotype plates, drawing instruments, 
dress trimmings in which metal is the material of chief value, em- 

(420) 



A Pennanoit Tariff Conuiiission 157 

bossing dies, engravers' tools, enameled portraits, metal eyelets, 
pistols and other firearms, fluoroscopes, and metal foil. 

These are only a few instances taken from an alphabetical ar- 
rangement of the tariff decisions, and I only got through letter F. 
It can be easily imagined to what extent these instances can be 
multiplied by going through the entire alphabet for the decisions 
under that paragraph alone. 

Will anyone contend that a simple article like nails or wire 
necessarily requires the same amount of protection as so complex 
a mechanism as a revolver or an electric dynamo? 

Is there any logic in classing buttons and stoves together? 

Should bullets and buggies, should automobiles and bull's-eye 
lanterns pay the same duty? 

Are farm implements and gold boxes in the same class? 

Is there any connection between carriages and dress trimmings ? 

Why classify railway cars and enameled portraits together? 

Why should cannon for war and crosses for churches be put 
in the same class? 

Yet all these are in the same classification and pay the same 
rates. • 

But more absurd than this is the fact that they are put in the 
same classification by the appraisers and the courts, passing on 
each article because Congress did not classify them at all. 

And as outrageous as it is absurd is the fact that nobody knew 
what duties these articles would have to pay until the guess of the 
appraisers and the courts filled up the holes in the law. 

Compared with the scientific, clear, accurate classification of 
the German schedules, for instance, our classifications are confused, 
uncertain, chaotic. The German tariff places each article exactly 
where it belongs, plainly specifies it and fixes the duty to be paid 
on it in a marginal column so that every nation who sells goods to 
German producers and every German producer that buys goods 
from other nations knows precisely the duty that must be paid on 
almost every article. Of course, cases arise in Germany where the 
classifications of some articles are open to dispute ; but such cases 
are rare compared with like cases in our tariff. In short, the Ger- 
man classification reduces confusion and doubt to the minimum; 
our classification raises confusion and doubt to the maximum. 

How did Germany make her tariff classifications so much 

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158 The Annals of the American Academy 

clearer, simpler, and more accurate than ours? By the common- 
sense plan of having an expert commission arrange these classifi- 
cations. But that was only a part of the work of the German com- 
mission. Years ago Germany saw that only a body of experts 
could get the facts and arrange the schedules for her tariff; she 
saw that the only work which the Reichstag could do was the fixing 
of duties to the items, the facts about which the expert commission 
found out and laid before the Reichstag. So Germany selected 
for this work thirty of the best fitted men to be found in the empire. 

This commission consulted more than 2,000 trade and indus- 
trial experts. It investigated every phase of every industry in the 
empire which might bear upon the tariff. It considered all these 
industries both separately and in relation to the others. It carefully 
studied the tariffs of other countries. It gave due weight to Ger- 
many's export trade. In short, everything that goes into the 
making of a tariff was worked out to the smallest detail by this 
German expert commission. It spent almost six years at this 
work. It would not be necessary for our commission to work so 
long. For the German commission framed the bill ; the general 
government then sent it to each state forming the German Empire, 
those states took a year to consider it, and then it was returned 
and a copy of the revised bill sent to every productive industry in 
the empire. It may be said that the German commission worked 
perhaps two years and a half on the labor which I am proposing 
our commission shall do. They laid the results of this work before 
the Reichstag, and upon that work Germany built her present tariff. 

Japan, France, and other up-to-date countries follow the same 
plan. They came to see, as we are coming to see, that in no other 
way could a tariff be builded with knowledge and wisdom. By 
this plan and by maximum and minimum tariff the foreign trade of 
Germany has passed every other country, comparatively speaking. 

The German Empire, with an area nineteen times smaller than 
the United States, and much of its land poor and unproductive, and 
with a population less than two-thirds as great as ours, neverthe- 
less exports more than one and a half billion dollars' worth of 
German products, more than two-thirds of which are manufac- 
tured articles, whereas we export $1,717,953,000 worth of products, 
most of which are raw material. 

Only $460,000,000, or 27 per cent, of our exports are manu- 

(422) 



A Permanent Tariff Commission 159 

factured articles, and $226,000,000, or 13 per cent, are semi-manu- 
factured articles, and of these, nearly all are steel, copper and 
petroleum, requiring so little skilled labor that they may be called 
raw material. 

So we see that German exports of manufactured products are 
far greater than our own, and if our superior advantages in popula- 
tion and resources are considered their lead is astonishing, humiliat- 
ing. It is her foreign markets that give Germany her industrial 
prosperity. Indeed, it is her foreign markets which enable Ger- 
many to live. The time is here when foreign markets for our manu- 
factures are becoming almost as important to American industry 
as they are to German industry. This one fact alone commands 
us to take the same up-to-date, scientific steps with our tariff that 
Germany has taken with her tariff. 

Only two objections are made to a permanent tariff commis- 
sion. The first is that it is the business of Congress to do this 
work ; but this whole paper has been an attempt to show that Con- 
gress cannot do this work and has not done it. With the growth 
of our trade and the enormous increase in the number of items cov- 
ered by our tariff, everybody who knows anything about this subject 
knows very well that Congress cannot do this work in the future. 

The second objection is that we once had a tariff commission, 
but that it amounted to nothing. We are told that Congress paid no 
attention to it. The answer to this is that the exact reverse of these 
statements is the truth. 

It is a fact of history that the first and only scientific classifi- 
cation of the tariff schedules ever made in America was made by 
the Tariff Commission of 1882, and that classification adopted by 
Congress remains, with a few changes, to this day. The present 
classification is in substance the classification made by the Com- 
mission of 1882, with some detailed additions and some detailed 
subtractions ; but the classification itself as a scheme of a tariff is 
kept practically intact to this day. 

Every substantive recommendation of that commission was 
the foundation of nearly all our tariff laws since, such as the cus- 
toms court, the administrative laws of the tariff for the Treasury 
Department; and its classification was the first scientific classifica- 
tion ever made in this country. 

The classifications recommended by that commission were 

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i6o The Annals of the American Academy 

adopted as a scheme practically intact, and Congress even adopted 
the enormous majority of the duties recommended by the commis- 
sion. This is merely a condensation into one sentence of what will 
be found by comparing the bill reported by the Commission of 1882 
and the bill adopted by Congress in 1883. 

And finally, a recent example — indeed, one immediately be- 
fore our eyes — is absolutely unansw^erable proof of the necessity 
of a tariff commission ; proof, too, furnished by some of those 
who are the strongest foes of expert commission w^ork in framing 
tariff laws. I refer, of course, to the present monetary commission. 
If it is necessary for a commission to investigate financial systems 
in order to devise a better one for ourselves, certainly the same 
process is even more necessary for the complicated, intricate and 
involved problems of a tariff. After all, the financial systems of 
the great commercial countries of the world are not profoundly 
dissimilar; they dovetail one into another without serious difficulty. 
But tariff systems do not adjust themselves so easily; indeed, they 
do not adjust themselves at all. They must be framed with precise 
and scientific reference to the tariff system of every other nation. 

At the last session of Congress, when it was doubtful whether 
the new currency law could pass the Senate, I suggested to Sena- 
tor Aldrich that he agree to a monetary commission to study the 
whole subject, and thus insure a thorough-going, business-like and 
scientific reform of our monetary system. Together with many 
other Republicans, I was not at all satisfied with the currenc}' 
measure passed by the last session. It w^as at best a makeshift, 
as its principal advocates admitted — a mere temporary measure 
designed to tide the patient over a possibly critical period. It 
recognizes principles to which I, in common with many other 
Republican Senators, did not feel like committing myself with- 
out more exhaustive study, it refused to recognize other principles 
which some Senators did not feel like rejecting without more ex- 
haustive examination. 

In this state of uncertainty and with the plain fact before us 
that unless something further was done this measure would delay 
any sound and thorough-going financial reorganization, many of 
us hesitated to vote for it, but I thought that if a commission were 
appointed to explore the whole subject and report to Congress a 
comprehensive recommendation, any possible evil in this temporary 

(424) 



A Permanent Tariff Commission i6l 

financial makeshift (the new currency law) would be minimized; 
while if this new currency law was not passed at all, there might 
be a danger of a brief recurrence of the recent panic. Possibly the 
new currency law will prove a success ; but everybody admits that 
it is not a permanent solution of our financial problems. 

To the suggestion of a currency commission, Senator Aldrich 
assented. Accordingly this was confirmed of record in open Sen- 
ate; I asked Senator Aldrich in debate whether he would consent 
to such a commission, and he immediately replied with great frank- 
ness that he would and that he would expect such a commission 
to be authorized before Congress adjourned. Accordingly, such 
a commission was afterwards created. 

This commission is a clinching proof that a tariff commission 
also should be appointed. Yet serving on this commission are 
several men bitterly hostile to a tariff commission — notably Sena- 
tor Hale. Senator Hale is determined and aggressive in his oppo- 
sition to a tariff commission ; yet he not only favored the monetary 
commission, but consented to -become a member of it; and not only 
that, but also is one of the most active, if not the most active 
member of the sub-committee of the commission rtow visiting' 
Europe. Other examples might be given. 

These men and many others like them frankly state their 
purpose to fight a tariff commission to the last ditch, yet here 
they are serving on a monetary commission. Some of this mone- 
tary commission are said to be at work upon our general tangle 
of financial legislation at home ; others are in Europe, where they 
are supposed to be working night and day gathering information 
about the financial systems of the more advanced European coun- 
tries. And yet every student knows that the facts necessary for 
the making of a tariff are harder to obtain and the various diffi- 
culties presented by customs laws far more numerous than those 
presented by a financial system, and equally delicate. Everybody 
knows, too, that all the financial laws of Canada and the various 
European countries are printed and available to any American 
student — certainly to any American commission that has the money 
to employ a translator. So are the debates, pamphlets, books and 
Indeed the whole literature of the subject. 

But in the case of the tariff, while the various tariff laws of 
other countries are at the disposal of the American student as much 

(42s) 



162 The Annals of the American Academy 

as their financial laws, the facts relating to manufacture, labor, 
transportation and dozens of other matters equally important can- 
not possibly be obtained without expert investigation. So, if the 
monetary commission was advisable — and I heartily favor it — it is 
clear that the tariff commission is equally so — yes, far more so, to 
put the comparison very moderately indeed. 

The truth is that the permanent tariff commission for which 
my bill provides is the most moderate legislation of this kind which 
Congress ought to think of passing. Scientifically speaking, a much 
more thorough commission with larger powers ought to be pro- 
vided for. But a step at a time — until Congress is forced to a more 
sensible view of the business necessities of the American people we 
cannot hope for a really scientific, comprehensive tariff commis- 
sion — one that would examine schedules and suggest rates ; one that 
would constantly examine classifications and properly and scientific- 
ally modify them; and one whose recommendations as to rates and 
classifications Congress would follow after a business-like examina- 
tion and without any playing of politics or partisan log-rolling. 
Indeed, it is a question whether much larger powers than these 
should not be given to a permanent commission. Three or four 
months after I introduced my tariff commission bill. Senator 
LaFollette introduced a bill which embraces all possible powers that 
a commission ought to have. There may be some question whether 
some of its provisions are practicable and advisable; but, on the 
whole, the LaFollette bill will repay the careful study of any one 
who is giving serious and modern-minded attention to this grave 
question. 

I shall not go into the tariff question as such. Whether any 
man favors a purely revenue tariff, a straightout protective tariff, 
or any other kind of a tariff, Congress cannot do without this body 
of experts to help it with facts and classifications. Yet one brief 
word should be said at this moment about our tariff policy. We 
must have more foreign trade. We must open foreign markets to 
our live cattle, which are now kept out of those markets. 

Our government should get the same advantages for American 
manufacturers in foreign trade that the German Government gets 
for German manufacturers in foreign trade. 

American producers demand that the doors of other nations 
which are open to their rivals shall no longer be closed to them. 

(426) 



A Permanent Tariif Commission 163 

We cannot open these doors by a purely revenue tariff, because 
such a tariff gives other nations trade advantages with us without 
getting from those other nations any trade advantages in return. 

We cannot open these doors by a purely protective tariff, 
because such a tariff gives other nations no trade advantages with 
us, but neither does it get any trade advantages from them. 

We must have a system that gives us the same weapons that 
our rivals have, by which we can get for our producers the same 
favors that our rivals get for their producers. 

We must have a double tariff, the first to apply to such nations 
as will not give our producers special favors in their markets, and 
the last to apply to such nations as will give our producers special 
favors in their markets. 

When this demand was first made in Congress during the recent 
session we were met with arrogant refusal. Yet, within two months 
the statement was made on the floor of the House that when the 
tariff is revised it shall contain the maxirnum and minimum prin- 
ciple.^ 

Every up-to-date nation, except Great Britain and ourselves, 
has now adopted the maximum and minimum tariff plan; and the 
agitation for this plan has begun in Great Britain. 

^The fight in the last session for modern tariff methods resulted in considerable 
progress, when we consider the fierce hostility to any change in our tariff procedure. 
We were told that there would be no revision of any kind — that position we 
overcame ; that a double tariff would not be tolerated — that position we overcame : 
that no investigation during adjournment would be made — 'that also was abandoned 
and the Ways and Means Committee of the House was instructed to hold hearings ; 
that experts would not be employed — but a compromise was accomplished by which 
the Finance Committee of the Senate is authorized and directed to employ experts 
from the executive departments of the government. 

When my tariff commission bill was introduced, its best friends believed that 
nothing whatever could be accomplished ; I. myself, felt that no progress could 
be made at the last session. All of us considered our efforts as the heginning of 
a long fight and nothing but a beginning. But public opinion crystallized so 
rapidly that Congress was forced to do something and the above points were 
yielded, reluctantly and one by one. 

Great organizations of producers agitated the question all over the country. 
The National Association of Manufacturers — the greatest organization of manu- 
facturers in the world — was especially effective. Indeed it may be said that this 
remarkable body of American business men head the fight among the people. 
The National Stock Breeders' Association, Tbe National Grange, scores of commer- 
cial bodies all over the land heartily joined and worked tellingly for this plainly- 
needed and common-sense reform. It was the -first time in our history that 
farmers and manufacturers, stock raisers and merchants ever united on any 
tariff propositionv 

(427) 



164 The Annals of the American Academy 

By it German producers are, comparatively speaking, selling 
more German goods abroad than any other nation. 

Canada has just enacted a triple tariff; by this she has gotten 
a practical monopoly of her live stock in the markets of France. 

Only Great Britain, Persia, Abyssinia and China now have 
purely revenue tariffs; only the United States and a few South 
American countries now have straightout protective tariffs. 

Our rivals followed our -plan of a single protective tariff and 
then logically developed that plan into a double protective plan. 
We must be as wise now as they were then; and just as they took 
the single protective plan from us, so now we must take the double 
protective plan from them. Our manufacturers, our cattlemen, our 
agriculturists, our miners, all our producing classes ask only 
the same advantages that their rivals have in the markets of the 
world. They demand no more than this ; they will accept no less. 

The conclusion of the whole business is that we must have a 
permanent tariff commission ; and that our tariffs should be builded 
upon the information, classifications and general advice which this 
commission gives to Congress; and that during our next tariff 
period we must have a maximum and minimum tariff. It is too 
bad that under our constitution the autonomous conventional tariff 
of Germany is a practical impossibility. Next to the German tariff 
trade system, the maximum and minimum tariff is the best. 



(428) 



IMPORT DUTIES : HOW THEY SHOULD BE LEVIED 



By D. a. Tompkins, 

President, D. A. Tompkins Company, Charlotte, N. C. ; member of United 

States Industrial Commission, 1899- 1900. 



Under our form of government the principal sources of funds 
to cover the expenses of government are import duties, commonly- 
referred to as the tariff. If this source of money should be cut off 
we would be very much embarrassed under the constitution to raise 
the necessary money to pay the expense of government. The 
amount of money necessary to be raised to cover the government 
expenses, which, of course, include the army and navy, has been 
an increasing one from the foundation of the government^ but at 
the present time, generally speaking, and taking the average of the 
last few years, this sum aggregates something like a billion dollars 
a year, part of which is raised by internal revenue on whiskey and 
tobacco and otherwise, the bulk of which is obtained from the tariff 
on imported goods. It matters not whether the tariff is so laid 
as to protect certain domestic industries which need protection or 
whether it is laid upon products which are not raised in this coun- 
try, the aggregate sum must remain about the same. Many people 
talk as though free trade would mean that we would pay no duties 
or less duties. This is not true, but it might mean that we would 
pay duties upon tea and coffee which are not raised in this country 
in preference to cotton yarns and cloths which are made in this 
country. 

No party which is charged with conducting the United States 
Government could possibly have free trade. No party could mate- 
rially diminish the quantity of money necessary to be raised annually 
to operate the government. The one question unsolved is whether 
the tariff shall be laid in a way to protect American industries, or 
whether it shall be laid upon articles we do not manufacture and 
thereby leave certain industries, both in agricultural and manufac- 
turing lines, to the vicissitudes of competition with established busi- 
ness in Europe and elsewhere, and of cheap skilled labor in Europe 
and elsewhere. It would seem hardly probable that with a fair 

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i66 The Annals of the American Academy 

understanding of the subject any one could offer to put American 
cotton yarns or American cotton cloths upon the free list and raise 
the money now derived from a tariff upon these articles by putting 
a tariff upon tea and coffee. 

Yet there is very considerable dissatisfaction about the tariff. 
The basis of this dissatisfaction would seem to be that there is no 
systematic manner of ascertaining by judicial investigation, upon 
what articles and in what amounts the tariff should be laid. When 
the government was first founded the constitution provided that 
inventive genius should be stimulated in America by giving patents 
for new and valuable ideas. In the early days of the republic there 
was no patent office, no commissioner of patents, no force of experts 
to investigate the merits of a new invention. When Mr. Eli Whit- 
ney applied for his patent upon the cotton gin, President Washington 
handed the papers to the Attorney General to examine. Having 
been advised that the idea seemed a new and valuable one, the 
President directed his Secretary of State to prepare a patent, which 
was done. Three different executive officers of the government, to 
wit: President, Secretary of State and Attorney General, signed the 
patent. Let us suppose that the President of the United States 
should at the present time attempt to handle the patent subject and 
that he should require the Secretary of State and Attorney General 
to join him in investigating and issuing patents. It is evident that 
he would never do any other business except examine patents and 
that the three of them could not get through with 5 per cent of the 
business. There is now a commissioner of patents, charged with 
the organization of a force of expert men, whose duty it is to make 
a proper and full and careful examination of every application, and 
none doubts that in each separate case the conclusion arrived at is 
approximately correct. This is a subject upon which vested inter- 
ests are naturally critical, but the patent office is so handled under 
the commission and by the experts that the loser is tolerably well 
satisfied in every case with the result and verdict. 

In the early days of the republic the tariff was handled very 
much as the patent business was. Alexander Hamilton, who is the 
foster father of the protection idea in America, would make up a 
list and go over it with the President and Secretary of the Treasury 
and a few prominent members of Congress, and come very 
nearly getting a proper and satisfactory tariff list. We con- 

(430) 



Import Duties 167 

tinue this unsystematic method even to the present day, while 
interests have nudtipHed many fold and the variety of industries 
has increased many fold. We are still expecting a small committee 
of Congress to make a tariff list in about a month. There are 
approximately 4,000 items on the tariff list. No rational man 
would possibly hold that a committee of Congress in a month or six 
months could handle these items with any degree of intelligence or 
that their conclusions w^ould be ap'proximately what would serve 
the best interest. Under the present system some of the trusts get 
many times more than they are entitled to, while some wholesome 
industries get less than they are entitled to. Times so change that 
certain items need revision every six months. Certain other items 
would not need revision in six years. Sweeping changes along the 
whole list at any time mean disturbance of the whole industrial 
condition of the country. 

The proper system would seem to be more or less similar to 
that which has been developed for handling patents. If we had a 
semi-judicial commission with a corps of experts and a big official 
building to be called the tariff office like the patent office, and one 
subject at a time was put into the hands of the experts in the 
department suited to that item, then upon the basis of its findings, 
Congress might well make a tariff that would at the same time: 

(i) Raise the revenue necessary to run the government, and 
no more than was necessary. 

(2) Protect each industry, and no more than protect it. 

(3) Protect American labor, and no more than protect it. 

(4) By the reduction of duties remove the unnecessary and 
extravagant protection from articles manufactured by combina- 
tions and trusts. 

Such a tribunal might recommend raising as well as lowering 
the tariff, and through such a tribunal corrections of the tariff list 
could be carried on at all times and would never upset the country 
by wholesale revision all at once. 

There is an impression that the manufacturer gets all the benefit 
of protective duties. If duties are properly laid, no one gets more 
benefit than the farmer. Omitting the case where the article which 
he raises is protected, as, for example, in the case of sugar and 
wool, yet in every case the farmer gets indirect benefits which even 
exceed those derived bv the factorv itself. Fifteen vears ago the 

(43i> 



i68 The Annals of the American Academy 

price of cotton throughout the South was five cents per pound. 
To-day the price exceeds ten cents per pound. The building of 
factories has contributed to this increase in the price of cotton more 
than any other one cause. The manner in which the factories have 
done this is as follows: 

(i) They have drawn labor out of competition of cotton pro- 
duction into the factories. 

(2) The factories have increased the consumption of cotton. 

(3) The factories have made markets for perishable farm 
products. 

Therefore the little protection given to cotton yarns and cotton 
cloths not only helps to support and maintain the manufacture of 
these in America, but goes directly to double the price of cotton. 

Considering the necessity of raising the bulk of the expense 
money for the government by the tariff, the talk of free trade is 
more than idle. Clearly the idea of a prohibitive tariff would be 
foolish. If we should divide the American public into four parts 
according to opinion on this subject of free trade and tariff, not 
more than 10 per cent would stand for free trade. Probably 40 
per cent would stand for a tariff for revenue, which incidentally 
protected American industries. Probably another 40 per cent would 
stand for tariff for protection which incidentally raised the neces- 
sary money to pay the government expenses. Probably 10 per cent 
would be for prohibitive tariff. In the face of this division, that 
40 per cent which stands for revenue with incidental protection 
follow the lead of the 10 per cent free traders. That other 40 per 
cent w^hich stands for protection which incidentally raises revenue 
follow the 16 per cent of prohibitive tariff leaders. In reality the 
difference between the two greater divisions is not so much as 
between "tweedledum" and "tweedledee," and yet the two sets of 
extremists keep these divided. With a semi- judicial commission this 
would disappear. The controversy by the public over the subject of 
tariff would disappear, because the results of the judicious investi- 
gation and intelligent study of each subject by experts would give 
results in each case that none of us could controvert. 

The institution of slavery as it grew in the South dried up 
industrial interests. It gradually brought the South to a condition 
of agricultural activity handled by slave labor. In this situation, 
with no industrial interests to protect and no particular class of 

(432) 



Import Duties. 169 

labor to protect, the general belief in the idea of free trade grew. 
As industries are now developing again under free institutions and 
as the labor of the South is now again free and ambitious of better 
living, the South has a renewed interest in the subject of protection 
for its industries and its labor as well as a renewed interest in 
withdrawing tariff protection from combinations and trusts. What 
applies to the South with reference to protection, naturally applies 
to the rest of the United States. Every part of the country would 
be served if the tariff could be handled by a semi-judicial commis- 
sion and in departments where experts could investigate each item 
and findings be made as satisfactory as those now made upon the 
subject of patents. 

Without such scientific investigation to ascertain the facts, 
either by a government or some other competent tribunal, it is 
impossible to discuss the duties on textiles or any other items 
intelligently. 



(433) 



AN ARGUMENT FOR A PERMANENT EXPERT TARIFF 

COMMISSION 



By H. E. Miles, 

Of the National Association of Manufacturers, Chairman Central Committee 

on Expert Tariff Commission, Representing Fifteen National Organizations. 



There are four thousand items in the tariff. It is impossible 
for Congressmen to post themselves on a hundreth part of the 
schedules. The work of drafting legislation must be done by others ; 
as, in great measure, it has been in the past. 

The inability of Congress to frame a proper tariff, even if so 
disposed, by present methods, and the inexperience of Congress, 
are little appreciated. A tariff bill is framed in the first instance 
by the majority members of the Ways and Means Committee of 
the House. It is expected to pass the House as submitted with little 
alteration. The minority members of the committee have little or 
nothing to do with it. For instance, in the making of the McKinley 
bill the minority members were present at the open hearings, but 
very, early in the committee's actual constructive work, the minority 
members said to the majority members, 'Ve will not embarrass you 
by our presence. We will, of course, make a minority report, and 
with that understanding we leave you to your work." 

The present Ways and Means Committee which, if the Repub- 
licans are successful, will frame the next tariff, has upon it only two 
Republicans who have had any experience in the making of tariffs, 
Mr. Payne and Mr. John Dalzell. One member only of the 
minority, Mr. Cochran, ever served upon a tariff-making com- 
mittee before, Mr. Cochran being one of the majority members 
who framed the Wilson bill. 

Imagine, if you can, a tariff framed in a know-it-all-in-ninety- 
days session by a lot of novices under the direction of Mr. Payne, of 
New York, and Mr. Dalzell, of Pittsburg. Not one of the com- 
mittee is a manufacturer. They know as little about manufacturing 
as manufacturers know about law, and yet Messrs. Payne, Dalzell, 
and a very few others who support them, insist that these men 
shall so legislate as to affect the prices, cost of living, and the pro- 

(434) 



Argument for Expert Tariff Coiunission iji 

fits and the savings of our ninety million inhabitants, and shall 
determine what shall be our success in foreign trade, where we meet 
Germany with its perfect tariff, based upon the findings of the 
German Tariff Commission of thirty-two experts, who gave five 
years of study to her interests, consulting in that period 2,000 other 
experts. As well give the throttle of a locomotive over to a child 
and expect the best consequence. 

The Dingley Bill 

The Dingley bill had among its majority members only four 
men, Messrs, Dingley, Payne, Dalzell and Hopkins, a newspaper 
editor and three attorneys, who had any previous experience, and 
Mr. Benton McMillan of the minority. That men so inexperienced 
should have hastily made a tariff for this nation ''was worse than 
a blunder; it was a crime," They only made a great, blind jab at 
the task. They began wrong by taking classifications more than 
a generation old, very inapplicable to our time, having neither 
knowledge nor time to consider that important phase of the subject 
at all adequately, and consequently \^^e have had 300,000 lawsuits 
on classifications and appraisals, nine-tenths of which might have 
been avoided. 

The Wilson Bill 

So of the Wilson bill. Only three members of the majority 
had had previous experience and that as minority members of the 
committee which framed the McKinley bill where, they had too 
delicate consideration for the majority even to be present when 
the work was done. These three men, with others wholly inex- 
perienced, made the Wilson bill. There were of the minority 
members of the Wilson Committee, five Republicans of previous 
experience, whose experience was neither desired nor made use of. 

The pitiable plight of the inexperienced Democrats Avho made 
this Wilson Bill, is in part illustrated by the follow^ing statement 
of Senator Vest, of Missouri: 

I look back now upon what occurred during the debate and conference 
on the Wilson-Gorman bill as a nightmare, from the effects of which I have 
never recovered. 

Before the conference ended three of the conferees had broken down 
under the constant strain to which we were subjected. Wilson was attacked 
with facial erysipelas, and in a few days afterwards I became a victim of 

(435) 



1^2 The Annals of the American Academy 

the same malady. We sat opposite to each other, our faces discolored by 
iodine and looking like two Indians painted for a war dance. 

In a short time afterwards Senator Harris also went upon the sick list 
and told me subsequently that he dated the failure of his health from the 
effects of overwork and constant anxiety incident to the struggle over the 
Wilson-Gorman bill of 1894. 

Senator Jones was also stricken down with angina pectoris and was 
compelled to go abroad in order to obtain relief. I have myself never been 
able to recover from the exhaustive labor to which I was subjected during 
that terrible struggle. 

And as pitiable was the plight into which they put the whole 
country by the bill itself. The country was painted with iodine for 
years. 

Bribery and ignorance worked together, impelling President 
Cleveland impulsively to declare the bill one "of perfidy and dis- 
honor." 

The McKinley Bill 

Likewise as to the McKinley bill. Mr. McKinley himself was 
the only man of the majority with previous experience. A gen- 
tleman upon that committee, who was said by Mr. McKinley to 
have written more of the schedules than any other man, declares 
that they acted without information — could not get information, and 
simply did the best they could. Mr. McKinley's statement with 
reference to the glass schedule referred to in my preceding paper 
confirms this statement. He did not put the making of this and 
other schedules into the hands of the beneficiaries because he 
thought that the proper way, but because in the hurry, and lack of 
proper methods there was no other way. 

Importance of Technical Counsel 

The importance in a money sense of having an honest and scien- 
tific tariff cannot be overestimated. The total value of the yearly 
output of our factories is $14,800,000,000. Much more than half 
of this is overcharged to the consumers not because of protection, 
but because of the graft in the tariff. The injury is cumulative. 
My own business pays $50,000 per year of this graft. It must 
make the same profit on this $50,000, as on the rest of its pur- 
chases. It therefore charges $60,000, for the fifty expended. The 
jobber and the retailer each adds his profit, until the consumer 

(436) 



Argument for Expert Tariff Commission 173 

pays $80,000 or more for the initial $50,000 of graft. The total un- 
necessary cost of the tariff to American consumers cannot be esti- 
mated at less than $500,000,000.00 per year. It has been estimated 
as more than double this figure. 

Nothing but the unprecedented prosperity of the nation has 
made it possible for the people to submit to the situation without 
acute consciousness and extreme financial discomfiture. Nothing 
but its skilful indirection has kept the people from rising in protest 
and compelling correction. Few people can even discover from the 
tariff law what are the charges. Some great manufacturers cannot 
understandingly read their own rates. The man who made the 
original drafts of the McKinley and Dingley bills said: "The peo- 
ple won't stand for more than fifty per cent duties, and so I am 
making fifty per cent the apparent rate and by jokers and provi- 
sions not commonly understood, I am raising the rates far, far above 
that." And so he did. The law was made to cheat with. 

Many of the people are aware of this. As time passes they 
find their best efforts avail nothing as compared with those of 
victorious trusts. Virtue no longer receives due reward. A sort 
of contempt attaches to it. The honest man is coming to look 
upon his own rectitude as if it were a sort of weakness. He won- 
ders how he, too, can fool the people, and so bring into his pockets a 
miraculous stream of unearned dollars. 

Great bankers agree that the half billion dollars of graft taken 
from the pockets of the consumers by the few ultra-protected in- 
terests is a great strain upon our financial resources. Those who 
get it, use it on the whole well. But things would be a thousand 
times better were these hundreds of millions of dollars left in the 
pockets of their rightful possessors, the consumers, to be used by 
them in the lesser and ordinary expenses of life. 

The manufacturers of the country, tired of graft, and of ill- 
judged and hasty determinations, almost unanimously declare for 
the establishment of a non-partisan, semi- judicial, expert tariff 
commission, which shall study the tariff, schedule by schedule, and 
from time to time, embody their findings in the form of recommen- 
dations to Congress and the Executive. Every other great country 
has such a board or commission of experts. All our progressive 
statesmen know we must come to this. Only the politicians and their 
few but very rich and powerful over-protected sponsors and backers 

(437) 



■f 



.174 The Annals of the American Academy 

oppose this plan. These opponents yield to the extent of conceding 
the necessity of expert determination, but they will not in fact yield 
any part of the graft-producing opportunities. 

The fight to-day is for experts of independent standing, who, as 
the servants of Congress shall determine the costs of production 
here and abroad and lay the clear proof before Congress. The pre- 
sent leaders of Congress do not want this proof. They now re- 
fuse to have it. Their disposition is still as it was when a committee 
of manufacturers asked for 250 per cent duty. A New York firm 
in good standing declared 50 per cent ample. The committee to 
whom these statements were made was composed of lawyers. Had 
they been serving a client in a private case, or the public to whom 
they were oath-bound, they would have demanded proof, and secured 
it. But no, they did not want it. They gave rates running for 
most part from 100 to 150 per cent, and it is said one of the benefi- 
ciaries of the rates wrote the schedule as usual. It was written too 
in a way not easily understood by the uninitiated. 

Congress has recently given to the country remarkable and 
conclusive evidence of the need of a permanent tariff commission. 
Of the 4,000 items in the present tariff few are simpler than those 
on wood pulp and print paper. By the power of the press the 
House against its will was compelled to consider these two items 
at the last session. It delegated to that task five members, who have 
spent some two months on these two items. We are told that they 
will be unable thoroughly to digest the evidence and report with 
understanding on these two items except as they devote many more 
weeks thereto. By instituting this inquiry, the House acknowledges 
that every rate should be based upon a thorough investigation. By 
the length of the inquiry it demonstrates the impossibility of the 
House itself, unassisted, determining rightly a fifth part of the 
schedules in a lifetime. The work must go undone or be delegated 
in great measure to a commission acting as the servant of Congress, 
and advisory also to the President, who, too, must act with under- 
standing. The power of tariff making rests wholly in Congress. 
That power carries an obligation so great, that exhaustive inves- 
tigation and a complete understanding should precede action. 

The ascertainment of facts is a judicial and not a legislative 
function. Congress has recognized this in the recent establishment 
of a currency commission, and by many previous commissions. 

(438) 



Argnmoit for Expert Tariff CoDunission 

There is no doubt of the wide-spread use of the commission 
plan or of its efficiency in handling questions which require careful 
consideration, and which bring into play quasi-legislative and 
judicial, as well as purely administrative judgments. Use is made 
of them in every department of our municipal, state and national 
service. In 1906 fifteen states supported 281 commissions. Recent 
state legislation has created more than 445. The multiplication of 
state commissions is one of the striking facts in our recent admin- 
istrative development. Those commissions generallv stand for 
efficiency and economy and for the methods of our business life. 
Many of the greatest national movements have found their origin 
in the work of these commissions. Two of national consequence 
have acted recently and most satisfactorily, these being the Anthra- 
cite Coal Commission and the Interstate Commerce Commission 
President Roosevelt recommends to Congress the establishment of 
a permanent commission to study, and, under . Congress, develop 
our internal waterways. The desirability of such a commission 
is immediately apparent. The Industrial Commission and others 
resulted in great improvement in the postal service, in the develop- 
ment of the Department of Commerce and Labor, in the rate, the 
Elkins and the immigration laws, in part to the anti-trust laws, 
etc. Alongside these, and of equal or greater moment, will soon be 
found a Tariff Commission. 

No commission can make a tariff. That power rests exclu- 
sively in Congress. Congress as a whole is well intentioned,' how- 
ever, and w-e gladly believe that Congress w^ill do rightly by the 
people, once the clear proof is put before it. 

The present tariff situation cannot long endure. It will, how- 
ever, be projected into the next law in part at least, and in as great 
measure as public sentiment permits. Every effort of daring and 
skilful manipulations in both parties will be made to yield as little 
as possible and to secure as much as may be obtained in excess of 
honest desert. May we hope that. an aroused public opinion \\\\\ 
do now and fully, that which will otherwise be done only in part. 
If the task be only begun it will needs be completed at a later date 
after the people have suffered a loss of billions of dollars, and a 
loss also of wdiat is of priceless value — public honor, moral worth, 
and international esteem. 



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